Zambia

There are no special CIT rules for groups of companies. Accordingly, CIT returns cannot be prepared on a consolidated basis for group purposes. Losses arising in one group company cannot be set against profits of another group company.

Transfer pricing

Transfer pricing rules apply to transactions between associated persons and require that transactions are undertaken on an arm’s-length basis. Otherwise, the associated person benefiting from a reduction in income as a consequence of any non-arm’s-length terms will have its taxable income adjusted as if the transactions had been undertaken on an arm’s-length basis.

In addition to maintaining up-to-date transfer pricing documentation, companies should ensure that there is a good audit trail and sufficient documentary evidence to demonstrate that related-party transactions were undertaken in line with the arm’s-length principle. Failure to provide transfer pricing documentation is an offence, with defaulters liable to various penalties. 

From 1 January 2021, multinational enterprises (MNEs) with annual consolidated group revenue exceeding ZMW 4,795 million are required to submit Country-by-Country (CbC) Reports to the ZRA within 12 months following the end of the financial year.

The document retention period in respect of transfer pricing is ten years. 

The penalty for non-compliance with transfer pricing regulations is up to 80 million penalty units (i.e. ZMW 24 million).

Thin capitalisation

Deductibility of interest is limited to 30% of a company’s tax EBITDA. This limit excludes businesses on the turnover tax system and taxpayers engaged under the Banking and Financial Services Act.

Controlled foreign companies (CFCs)

Zambia does not have a CFC regime.