The tourism sector of Zimbabwe has been hit hard due to the country’s new valued added tax (VAT) regulations, which raise the cost of things for operators and adversely affect the hotels’ and lodges’ advance bookings.
Finance minister Mthuli Ncube announced the changes, which increased the standard VAT rate by 0.5% to 15.5% in his 2026 budget that was presented in November last year.
Ncube’s measures also changed the status of the tourism from zero-rated to standard-rated.
The government’s shift have been a major talking point in the tourism sector, especially the issue of bookings which were done before the above VAT change on January 1.
The change applies not only to accommodation but also to activities, transfers, and bundled tourism packages, resulting in a marginal price increase for many of these services.
But it is the reclassification of tourism services, including transfers and activities, that is expected to have the largest financial impact on both operators and travellers.
For tourism operators, the timing of this VAT change has created significant uncertainty, especially regarding bookings that were contracted months or even years ago.
Jillian Blackbeard, CEO of Africa’s Eden, said bookings that had already been invoiced and paid before the VAT change would be honoured at previously agreed rates.
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However, the real challenge lies in those 2026 contracts that were negotiated on a zero-rated basis but had not yet been fully paid.
Many of these bookings, especially for group tours and Victoria Falls-based itineraries, were secured 12 to 24 months in advance.
These bookings now face an unexpected 15.5% increase, operators are struggling to manage this sudden change.
Blackbeard said while minor increases might be absorbed, many operators have limited capacity to absorb such a large hike in VAT costs without eroding already thin profit margins.
As a result, negotiations with international agents and clients have become more challenging, with many fearing reputational damage as they strive to meet their pricing commitments.
The reclassification introduced a host of new administrative and compliance challenges.
Tourism operators now need to revise their systems and contracts to ensure VAT is consistently applied across accommodation, activities, transfers, and bundled packages.
Given Zimbabwe’s multi-currency environment, these changes increase the administrative burden, particularly for services that cross borders or involve regional excursions.
In addition to the compliance risks, the increase in VAT creates the potential for disputes, especially with cross-border services, where customers compare prices across multiple destinations.
Operators now find themselves in the difficult position of having to revise their pricing strategies mid-contract.
The risks of misunderstandings or disputes have become a serious concern for businesses relying on international agents and direct bookings.
From a competitiveness standpoint, the VAT increase could hurt Zimbabwe’s position in comparison to other southern African destinations that offer similar product quality and wildlife experiences.
According to Blackbeard, removing the zero-rated VAT on key tourism services makes Zimbabwe less competitive, particularly for short-stay extensions and multi-country itineraries.
Buyers often compare prices across destinations when making their travel decisions, and this sudden VAT increase could tip the scales in favour of neighbouring countries with more competitive pricing.
The change places Zimbabwe at a disadvantage, especially at a time when other African destinations are revamping their tourism offerings and investing in infrastructure.
With countries like South Africa, Zambia, and Botswana enhancing their wildlife tourism products, Zimbabwe risks losing out on potential bookings for itineraries that combine multiple southern African destinations.
To mitigate the risks posed by this VAT change, many industry representatives are calling for a grace period.
There have been suggestions that a 12-month transitional period would allow operators to adjust their pricing and contracts to reflect the new VAT rates without imposing unnecessary financial strain.
The Tourism Business Council of Zimbabwe (TBCZ) and other tourism bodies have raised concerns about the timing of the VAT increase, with many packages already confirmed and paid for well in advance.
A phased implementation would give operators the opportunity to honour existing contracts and adjust their pricing structures accordingly.
While the industry acknowledges the need for VAT to be applied to tourism services, it is clear that a more gradual implementation would have lessened the financial and reputational risks.
Industry representatives have argued that a phased approach would have reduced the burden on both operators and customers, allowing the tourism sector to maintain its competitive edge while adjusting to the new tax regime.
While the immediate impacts of the VAT change may seem daunting, there are potential long-term benefits for Zimbabwe’s tourism sector.
In the longer term, the shift towards standard VAT could enhance the country’s tourism offerings by helping to formalise the sector and make it more attractive to international investors.
With a clearer tax regime in place, Zimbabwe could see an increase in compliance from operators, which may help to enhance the overall quality of tourism services in the country.
Moreover, the additional revenue generated from VAT could be channelled into the country’s tourism infrastructure, improving the experience for both tourists and operators.
If the government can invest these funds wisely, Zimbabwe’s tourism sector could benefit from improved roads, better facilities, and enhanced marketing efforts, which would attract even more visitors to the country in the future.
As Zimbabwe’s tourism sector grapples with the VAT shift, operators must adapt to the new tax regime and find ways to maintain their competitiveness.
While the challenges are significant, they also present an opportunity for the country’s tourism industry to evolve and strengthen in the long term.
By addressing the immediate concerns of operators and finding ways to manage the transition effectively, Zimbabwe can continue to grow as a top-tier destination for wildlife tourism, cultural experiences, and unique landscapes.
