Zambia

Corporate - Significant developments

Last reviewed - 20 August 2020

Following the 2020 Budget announcements, the following key measures have been put in place with effect from 1 January 2020:

  • Exemption from withholding tax (WHT) on interest payable to local banks and financial institutions licensed under the Banking and Financial Services Act, 2017.
  • Revision of the definition of ‘farming’ to exclude activities that are ancillary to agriculture.
  • Imposition of penalties on non-payment of presumptive tax at 5% of the tax per month or part thereof.
  • Introduction of specific penalties and interest on overdue returns of dividend payments to non-resident contractors at 102 Zambian kwacha (ZMW) per month or part thereof.
  • Definitions of ‘arm’s-length conditions’ and ‘actual conditions’ have been revised in the Income Tax Act.
  • Reduction in the rate of capital allowances claimed by mining companies from 25% to 20%.
  • Definition of ‘reference price’ in the Income Tax Act has been revised allowing the Commissioner-General to make adjustments to the reference price based on the quality of base metals and precious metals, and to use a third party price if the third party price is higher than the reference price in specific circumstances.
  • Definition of ‘shares’ in the Property Transfer Tax Act has been revised to include equivalent rights.
  • Introduction of exemption from property transfer tax on indirect transfer of shares for purposes of group reorganisation, under specific circumstances.
  • Determination of ‘realised value’ in respect of indirect transfer of shares is the greater of:
    • the proportion that the value of the Zambian company bears to the value of the transferred shares
    • consideration for the shares being transferred, and
    • the nominal value.
  • Proposed implementation of sales tax has been dropped.
  • Strengthening of the administration and efficiency of the value-added tax (VAT) system by introducing measures such as the mandatory use of electronic fiscal devices.
  • Zero rating of specific capital equipment and machinery supplied to holders of a mining licence for large-scale mining under the Mines and Minerals Development Act, 2015.
  • Zero rating of various alternative energy sources, such as gas stoves, gas boilers, and other appliances that use gas.
  • Zero rating of copper cathodes.
  • Introduction of rules requiring a tax invoice to include a customer’s Taxpayer Identification Number (TPIN) in business-to-business (B2B) transactions.
  • Validity of claim of VAT on credit notes limited to within three months from the transaction date
  • Standard rating ancillary services that are directly linked to the transit of goods through Zambia.
  • Restriction of VAT claim to 70% on diesel and 80% on electricity for companies carrying on mining operations, mineral processing, or exploration.
  • Imposition of VAT on the provision of electronic services where such services are performed/utilised in Zambia or for the benefit of a Zambian resident. This is irrespective of whether the supplier of the service has a place of business in Zambia or whether the services are paid for outside Zambia.
  • Notice of intention to terminate the Double Taxation Treaty between Zambia and Mauritius, effective 1 January 2021.

COVID-19 relieve measures

  • Group 5 of the zero rating order is amended to include a list of supplies for medical use that include, but are not limited to, diagnostic test instruments and apparatus, plastic face shields, and protective garments for surgical or medical use. This relief ends on 30 September 2020.
  • Suspension of excise duty on ethyl alcohol if used solely for the manufacture of sanitisers.
  • Suspension of export duty on copper ore and concentrates until 31 December 2020.
  • Suspension of export duty on precious metals under specific headings in the Harmonised System Code.
  • Suspension of export duty on hides and skins of reptiles of heading 4103.20.00 of the Harmonised System Code until 31 December 2020.
  • Waiver of penalties and interest accumulated on principal tax liabilities, entries, and returns between 1 April 2020 and 30 September 2020.
  • The VAT General Regulations have been amended to revoke Regulation 9A which excluded specific items from input VAT claims, deductions or credit including imported spare parts, lubricants, stationery, office repair, and maintenance, etc.