Am I too small for VAT?

It is the question small business owners ask us most. The answer is in ZIMRA's own rules, and it is simpler than most people fear.

The rule

Since 1 January 2024, a business must register for VAT when its taxable supplies exceed, or are expected to exceed, US$25,000, or the ZiG equivalent, in any twelve months.

Two phrases in that sentence do most of the work. Any twelve months means a rolling window, not January to December, so the threshold can catch you in July. And the ZiG equivalent means trading in ZiG does not take you outside the rule.

Which sales count

• Standard rated sales count.
• Zero rated sales count too, which surprises people.
• Exempt supplies do not count, and neither does hobby income or selling your old fridge to a neighbour.

Why it gets expensive

Sales pass US$25,000 and nobody adds them up, because the till does not and the books are three months behind. ZIMRA's page says the Commissioner General may register a business compulsorily if it reached the threshold and did not register, and the application should have gone in within thirty days.

The rule also says expected to exceed. A business on its way to the threshold is expected to see it coming, not discover it afterwards.

There are exceptions, such as closing down or a permanent cut in trade, replacing large capital assets, or a temporary and abnormal spike in sales. Those are for ZIMRA to accept, not for the business to decide on its own.

What registering adds

The standard rate is 15.5% from 1 January 2026, under the Finance Act, 2025. There are two ways to carry it: keep your prices and the VAT comes out of your margin, or raise them by 15.5% and your customer carries it. Either way, VAT you pay on purchases from registered suppliers can come back to you.

Registering by choice can make sense if you sell mostly zero rated goods, or if your customers are VAT registered businesses who want a proper tax invoice. To register voluntarily you need to trade continuously from a fixed place of business, with a bank account, and keep proper books for six years. ZIMRA also sets a minimum turnover for voluntary registration, so ask them or your accountant whether you qualify.

How Decima POS helps

VAT Watch on Decima Glance adds up your taxable sales for the last twelve months, every day: zero rated sales in, exempt sales out, credit notes taken off. It warns you from 80% of the way, and from the pace of your last ninety days it names the month you would pass the threshold. The VAT schedules show what registering would have meant for your own sales and purchases, line by line, to take to your accountant.

Your five minute check

• Add up your taxable sales for the last twelve months, leaving out exempt sales.
• Look at the pace of the last three months.
• Ask your suppliers for their VAT numbers, because you will need them.
• Talk to your accountant before you reach US$25,000, not after.

Decima Technologies (Pvt) Ltd. General information, not tax advice for your business.