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Zambia

Country Name: Republic of Zambia
Currency: Zambian Kwacha (ZMW)
Primary Tax Authority: Zambia Revenue Authority (ZRA)
Key Legislation:

  • Income Tax Act
  • Value Added Tax (VAT) Act
  • Customs and Excise Act
  • Investment Promotion and Protection Act
  • Tax Procedures Code

Fiscal Authority Allocation

Centralized Fiscal System:
Zambia operates a centralized tax system, with the Zambia Revenue Authority (ZRA) responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and customs duties.

Corporate Income Tax (CIT)

Standard Rate: 30%
Zambia imposes a corporate income tax rate of 30% on resident companies. However, companies in the telecommunications and mining sectors are subject to higher rates of 35% and 30-40%, respectively.

Corporate Forms and Taxation:

  1. Resident Companies: Taxed on worldwide income.
  2. Non-Resident Companies: Taxed only on Zambia-sourced income.

Exemptions and Incentives:

  • Investment Incentives: The Zambia Investment Promotion and Protection Act offers tax holidays, customs duty reductions, and VAT relief for companies investing in priority sectors such as manufacturing, mining, agriculture, and tourism.
  • Multi-Facility Economic Zones (MFEZ): Companies operating in MFEZs benefit from tax incentives, including CIT exemptions, customs duty relief, and VAT exemptions on imported capital goods and raw materials for a specified period.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 16%
Zambia imposes VAT at a standard rate of 16% on most goods and services. VAT applies to both domestic production and imports.

Exemptions:
Certain goods and services, such as unprocessed food, healthcare, education, and financial services, are VAT-exempt. Exports are zero-rated, allowing businesses to claim refunds on VAT paid on inputs used in producing export goods.

Personal Income Tax (PIT)

Progressive Rates:
Zambia applies a progressive personal income tax system to residents’ worldwide income and non-residents’ Zambia-sourced income.

Resident Tax Rates for 2023 (Annual Income):

  • Up to ZMW 54,000: 0%
  • ZMW 54,001 to ZMW 57,600: 25%
  • ZMW 57,601 to ZMW 82,800: 30%
  • Above ZMW 82,801: 37.5%

Non-Resident Tax Rate:
Non-residents are taxed at a flat rate of 15% on Zambia-sourced income.

Deductions and Allowances:
Taxpayers may deduct pension contributions, social security, and certain personal expenses, such as medical expenses and charitable donations, from their taxable income.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to Zambia’s social security system, managed by the National Pension Scheme Authority (NAPSA).

  • Employer Contribution: 5% of gross salary.
  • Employee Contribution: 5% of gross salary.

Withholding Taxes

  • Dividends: 15% for residents, 20% for non-residents
  • Interest: 15% for residents, 20% for non-residents
  • Royalties: 15% for residents, 20% for non-residents
    Zambia imposes withholding taxes on payments to non-residents, including dividends, interest, and royalties. These rates may be reduced under Zambia’s double taxation agreements (DTAs).

Transfer Pricing Rules

Zambia follows the arm’s-length principle for related-party transactions. Companies must ensure that cross-border transactions between related entities are conducted at market value. Transfer pricing documentation is required for multinational companies involved in related-party transactions.

Special Tax Regimes

  • Multi-Facility Economic Zones (MFEZ): Companies operating in MFEZs benefit from CIT holidays, VAT exemptions, and customs duty reductions for up to 10 years. These zones are designed to attract foreign direct investment in sectors such as manufacturing, infrastructure, and energy.
  • Investment Incentives: The Zambia Investment Promotion and Protection Act offers tax holidays, reduced CIT rates, and customs duty exemptions to companies in priority sectors, including agriculture, renewable energy, and mining.

Other Taxes

  • Customs Duties: Zambia applies customs duties on imported goods, with rates ranging from 0% to 25%, depending on the type of goods. Raw materials and essential goods may qualify for reduced or zero customs duties.
  • Excise Taxes: Excise taxes are levied on alcohol, tobacco, petroleum products, and luxury items.
  • Property Transfer Tax (PTT): Zambia imposes a property transfer tax of 5% on the sale of land, shares, and other immovable property.

Double Taxation Agreements (DTAs)

Zambia has signed several double taxation agreements (DTAs) with countries such as the United Kingdom, South Africa, and Mauritius. These agreements help reduce withholding taxes on cross-border income and prevent the double taxation of income earned in Zambia and other jurisdictions.

Local Taxes

Local governments in Zambia may impose minor taxes, such as business license fees, property taxes, and local levies. However, most significant taxes, including CIT, PIT, and VAT, are centrally administered by the Zambia Revenue Authority (ZRA).

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed within six months following the end of the financial year. Personal income tax returns are generally due by June 30th. VAT returns are filed monthly or quarterly, depending on the size of the business.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. The ZRA imposes interest at 2% per month on overdue taxes, with additional penalties for tax evasion or underreporting.

Recent Developments

Mining Sector Investment:
Zambia’s mining sector continues to attract foreign investment, particularly in copper and cobalt production. The government offers tax incentives, including CIT holidays, VAT exemptions, and customs duty reductions on imported mining equipment.

Renewable Energy Focus:
Zambia is promoting investment in renewable energy, particularly in solar and hydropower. Companies investing in renewable energy projects benefit from CIT reductions, VAT exemptions, and customs duty relief.

Digital Economy Taxation:
Zambia is introducing measures to tax digital platforms and e-commerce as part of broader efforts to expand its tax base. The government is also working to modernize tax administration by implementing electronic filing and payment systems.

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