The prime minister on Monday asked his independent ethics adviser to look into Zahawi’s multi-million-pound tax dispute as there were “questions that need answering”.
Sunak said the cabinet minister, who is defying Labour demands his resignation, would stay on during the inquiry.
Asked by reporters if the Sunak had confidence in Zahawi, the PM’s spokesperson said: “Yes. He retains the prime minister’s confidence.”
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The spokesperson added: “He thinks it is right to establish the facts and those findings to be made available to him.”
Zahawi has insisted his “error” over shares in the YouGov polling company he co-founded was “careless and not deliberate”.
The BBC was told that Zahawi paid a penalty to HMRC – reported by The Guardian to be around 30% – taking the total estimated settlement to around £4.8 million.
According to the broadcaster, the dispute was resolved while Zahawi was chancellor, between July and September, and ultimately the minister in charge of HMRC.
N0.10 did not give a timeline for the investigation to be finished and acknowledged it would be up to Sunak if he wants to disagree with its conclusions.
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“The prime minister remains the final arbiter of the code,” the spokesperson said.
Labour had called for Zahawi to be sacked and for Sunak to “come clean” on what he knew about the minister’s tax affairs when he appointed him party chairman.
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