Tax Registration and Types of Tax in Zambia
The Ministry of Financeis responsible for the formulation of tax policy in Zambia and the implementing agency is the Zambia Revenue Authority (ZRA).
The legislative frame work relating to the regulation and administration of the taxation is provided for in the IncomeTaxAct1966,as amended. The source of income and residence are the basis for liability to tax underthe Zambian tax regime.
Zambia Revenue Authority (ZRA)
The Zambia Revenue Authority (ZRA) is an implementing agency of Government mandated to assess and collect tax and advise the state on aspects of tax policy. Once the registration of a company is successfully done at the Patents and Companies Registration Agency (PACRA), one needs to register with ZRA for a tax payer identification number (TPIN No.) The TPIN number is then used to register for the various taxes applicable to the specific type and nature of the registered business. It only takes 24 hours to obtain a TPIN number at ZRA.
Taxes are directly handled by the two operating Divisions at ZRA i.e. Domestic Taxes Division and Customs Services Division. Domestic Tax Division handles direct taxes that include Corporate Tax, Turnover Tax, Pay-As-You-Earn, Withholding Tax, Property Transfer and Mineral Royalty. It also handles Value Added Tax which falls under indirect taxes. The Customs Services Division handles both Customs and Excise duties. The other Divisions offer support services to the two divisions.
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This is levied on the profit made by a business entity.
There are two tax rate for companies/ investor wishing to set base in Zambia:
Listed on the stock exchange 33%
Not listed companies 35%
There exist a uniform 2 % difference between the the two categories irrespective of nature of business for example under farming the current tax rate is 10% for non listed and 8% for listed. The same is the case with mining companies. The rates are on taxable profits.
The main incentives are on tax holidays for income tax mainly 5 years but some times do extend up to 7 years. These companies do pay PAYE until their tax holiday is over.
The other unique feature is the ability to claim accelerated tax relief on all capital items for instance in farming most of the plant, machinery etc enjoy 100% relief whilst some 50 and 25%. In manufacturing and mining there are also hefty reliefs.
Additional features are also derived from the double taxation treaty signed especiary with companies or investors associated with South Africa and Mauritious as the contents of the treaty prohibits taxation of incomes (in general) from a docile (resident) source but allows source country to tax it. Zambia can only tax the difference. For instance is tax in south is 40% and in Zambia its 35%, the later will only ta 5% whilst the countries associated with Mauritious will not be taxed at all.
The investors also enjoy personalized incentives if they commit to set up in rural areas or also pledge to employ a given number of locals. This is on a case to case basis.
|Companies listed on the Lusaka Stock Exchange: Existing||35|
|New (only for the first year)||35|
|New, with more than 33% shares by Zambians (only for first year)||30|
|Banks and other Financial Institutions: Income up to K250,000||35|
|Income in excess of K 250,000||40|
|Mobile Telephone Companies: Income up to K 250,000||35|
|Mobile Telephone Companies: Income up to K 250,000||40|
|Mining: Mining operation for industrial minerals(Variable profit tax) Y= 30+[15%-(ab/c)], where Y = tax rate to be applied per annum; a=15% b=8%; c=the percentage ratio of the assessable income to gross sales|
|Companies with turnover of K800,000 and below (tax is charged on the turnover)||3|
|Income from Non- Traditional Exports||15|
|Income from Business for Public Benefit Organizations||0|
|Income from Trusts, Deceased or Bankrupt Estates||35|
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This is income payable on gross sales or turnover for those businesses/individuals whose income is K800,000 or below. It is calculated at a rate of 3%.
Personal Income Tax
This is a tax levied on the income earned by an individual. In that regard, employers in Zambia are required to register and operate a Pay-As-You-Earn (PAYE) scheme under which they deduct laible taxes from their employees and remit to ZRA. This deduction also applies to expatriate employees working in Zambia even in cases where such emoluments are paid or payable outside Zambia. The personal tax rate ranges from 25 to 35% with the exception of farmers whose maximum applicablicable tax does not exceed 15%. Employers are further required to submit annual PAYE tax returns, at the end of every charge year, on a prescribed ZRA form. The applicable rates and thresholds are given below:
|On income from 0 to ZMW 3,300.00||0%|
|On income from ZMW3,300.01 to ZMW 4,100.00||25%|
|On income from ZMW 4,100.01 to ZMW 6,200.00||30%|
|Above ZMW 6,200.00||37.5%|
This is a tax on income that is deduted at the source and remmited to the Government. The applicable withholding tax rates are as follows:
|Dividends for individuals and companies (final tax)||15|
|Dividends for companies carrying out mining operations||0|
|Interest on Government bonds (final tax for individuals and exempt organisation)||15|
|Interst for individuals (earned form bank or building societies savings and deposit accounts). (Final tax)||15|
|Interst on Treasury Bills for individuals (final Tax)||15|
|Interest on Treasury Bills (final tax for excempt organisations)||15|
|Royalties, Management and Consultancy fees (Resident)||15|
|Royalties, Management and Consultancy fees (Non Resident)||10|
|Commissions (Non Residents)||20|
|Public Entertainment Fees for Non||20|
|Non Resident Contractors||20|
This is a regular payment made to the Government by mining firms as a consideration for the privilege of extracting particular mineral resources. It is not classified as a tax and is governed by the Mines and Minerals Act.
The rates are as indicated below:
|Open cast mine||9% of norm or gross value|
|Underground mine||6% of norm or gross value|
|Industrial minerals||6% of nominal value|
|Person in possession of minerals (other than industrial minerals)||9% of norm or gross value|
|Person in possession of industrial minerals||6% of gross value|
Value Added Tax
Value Added Tax (effective until April 2019)
VAT is levied at 16%. Some specified goods and services are zero-rated or exempt. Registration for VAT purposes is mandatory for every dealer in or supplier of standard rated and zero-rated goods and services, as defined in the VAT Act No. 4 of 1995 (which replaced sales tax), whose taxable turnover exceeds ZMW800 per annum. Voluntary registration is acceptable for dealers whose turnover falls below the stipulated minimum turnover.
The Value Added Tax (VAT) of 16 percent applies to both goods and services, of domestic production and those that are imported. VAT is levied on the c.i.f. value plus customs tariff. Exemptions from VAT include social services such as health, education, and funeral services. Registered suppliers or dealers are required to submit VAT returns monthly within 21 days of the prescribed accounting period unless they have been allowed the option for extended tax period. Late or failure to submit returns, including nil returns, attracts penalties. Input VAT can be claimed within a period of three years from the date of the tax invoice or other documentary evidence. The period in which input VAT incurred prior to the date of VAT registration can be claimed is 3 months.
|Value Added Tax (VAT) – on taxable goods and services and imports||16%|
|Customs Duty – levy on imported goods, charged on CIF (cost, insurance and freight value)||0-30%|
|Excise Duty – A levy on particular goods or products usually of a luxurious nature whether imported or produced domestically, imposed at any stage of production or distribution, by reference to weight, strength or quantity of the goods or products, or by reference to their value. The applicable Excise duty rates for targeted products are: Airtime (Talk time), Purified water, Carbonate-aerated drinks||17.5%|
|Fuel oils, Natural gases (Petrol per deca-litre) specific duty rate||11.43%|
|Motor Vehicles at importation (depending on engine capacity and type of vehicle)||10-30%|
|Cosmetics e.g. Soaps, Body lotion, Deodorant, perfumes||20%|
|Wines, spirits, Ciders and other fermented beverages||60%|
|Cigarettes (K per mille) specific duty rate||K240|
Customs and Excise Duty
Customs and Excise Duty – is a tax imposed on imports and exports of goods. There are three categories for import duties in Zambia: 25% mainly for finished products, 15% for intermediate goods and 0 to 5% for raw materials and capital goods.
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|Relevant documents||Customes and Exercise Duty Act|
ZRA Goes Electronic
- 2011 – launched web-based submission customs declaration through ASYCUDA World.
- Since 2011, ZRA has invested in scanners at borders posts to quicken the process of physical inspections. The time to inspect a truck reduces from five hours to 5 minutes per truck. Scanners have been installed at Chirundu, Katimamulilo, Kazungula and Chanida border posts.
- 2015 – introduced an on line system for filling corporate income tax, VAT and other domestic taxes
- 2016 – Introduced a E-Payment system that allows tax payers to make payments through the banks by using the internet. This is simple, flexible and secure for the tax payer. It is now possible for tax payers to use the same portal to pay both customs and other domestic taxes