Zimbabwe’s move to apply standard-rated VAT of 15.5% to tourism services from January 1 is increasing financial and contractual pressure across the tourism sector, particularly for operators managing long-lead international bookings negotiated under the previous zero-rated framework.
Confirmed in the 2026 national budget, the measure raises the standard VAT rate from 15% to 15.5% and, more significantly, reclassifies tourism activities and transfers from zero-rated to standard-rated VAT. While the accommodation component faces a marginal increase, activities and transfers now attract VAT of 15.5% hiking the cost of many tourism packages.
Cost implications
According to Africa’s Eden CEO Jillian Blackbeard, the impact is uneven across bookings, depending on when contracts were concluded and paid.
“Bookings that were fully invoiced and paid before January 1 are largely being honoured at previously agreed rates,” she said. “The main challenge lies with 2026 contracts negotiated on a zero-rated basis but not yet fully paid.”
Many of these bookings were finalised 12 to 24 months in advance, particularly for group travel and Victoria Falls-based itineraries. The sudden reclassification has forced operators to reassess pricing on programmes already distributed through international agents and global distribution channels.
Blackbeard noted that, while marginal increases may be absorbed in some cases, “there is very limited capacity to absorb a full 15.5% uplift on activities and transfers without eroding already thin margins”.
For existing unpaid bookings, this has triggered difficult renegotiations with international agents and clients, raising the risk of reputational damage at a time when the sector is still consolidating its post-COVID recovery amid broader global economic and geopolitical uncertainty.
The VAT shift also introduces additional administrative and compliance challenges. Operators must now revise systems, contracts and rate structures to apply VAT consistently across accommodation, activities, transfers and bundled packages. In a multi-currency environment, this increases compliance risk, administrative cost and the potential for disputes, particularly where cross-border services and regional excursions are involved.
A blow to competitiveness
From a competitiveness perspective, Blackbeard said the change weakens Zimbabwe’s relative pricing position within the region.
“Southern African destinations now offer comparable product quality and wildlife experiences,” she said. “Removing zero-rated VAT on key tourism services makes Zimbabwe less competitive, particularly for short-stay extensions and multi-country itineraries where buyers are making close price comparisons.”
Industry concerns are echoed in recent reporting by The Herald with tourism bodies warning that the timing of the VAT change threatens already confirmed 2026 bookings. Tourism Business Council of Zimbabwe President Clive Chinwada said long booking cycles make it difficult to revise contracted rates while Employers Association of Tour and Safari Operators Representative Clement Mukwasi noted that around 75% of 2026 packages were already confirmed and paid for by mid-2024.
Calls for grace period
Industry representatives have called for a transitional approach, including a possible 12-month delay, to allow contracts to be honoured and pricing structures to be adjusted without placing additional financial strain on operators or undermining Zimbabwe’s reputation in key source markets.
“The industry does not take issue with the principle of VAT being applied to tourism services and recognises the benefit of having previously enjoyed zero-rated status. However, a phased implementation with at least 12 months’ notice would have reduced financial and reputational risk,” added Blackbeard.
