Zambia

Following the 2025 Budget announcements, below are some of the amendments to the tax legislations in Zambia with effect from 1 January 2025:

Corporate income tax (CIT)

Certain legislative amendments are designed to stimulate economic growth, foster rural development, and streamline tax compliance mechanisms. The key changes and their implications for stakeholders are as follows:

Restriction on loss deduction

• Effective 1 January 2025, losses incurred in a charge year can only be deducted up to 50% of income from the same source in that year. Any excess loss is to be carried forward and deductible under the same 50% limitation rule in subsequent charge years.
• Prior to this amendment, the 50% limitation was only applicable to persons carrying on mining operations.

Deduction for Skills Development Levy (SDL)

• The amendment now allows for taxpayers to deduct the SDL as a tax-deductible expense prior to the actual payment of the levy to the Zambia Revenue Authority (ZRA). This amendment enables businesses to deduct SDL that is due but not yet to be paid by the end of the year.

Advance Income Tax (AIT) on remittances and exports

• The Income Tax Act (ITA) has been amended to introduce a 15% AIT on remittances of funds from Zambia exceeding 2,000 United States dollars (USD) or its equivalent for individuals without a valid Tax Clearance Certificate (TCC).
• Additionally, a 15% AIT will be imposed on exports if an exporter does not possess a valid TCC at the time of the export transaction.

Waiver of penalties for provisional tax underestimation 

• The ITA has been amended to empower the Commissioner-General of the ZRA to waive penalties levied on underestimation of provisional tax. The underestimation of provisional tax carries a mandatory penalty of 25% of the amount declared under the allowed threshold once a taxpayer submits the final income tax return for a given charge year.

Tax Clearance Certificate (TCC) requirements

The requirements for a TCC have been expanded and include the following services:

• Property transfers and vehicle registrations.
• Issuance of trading and exploration licences.
• Issuance of mineral permits.
• Issuance of title deeds from local authorities.
• Membership renewals for professional bodies.
• Obtaining funds from any institution registered under the Banking and Financial Services Act.

Collective investment and private funds

• The ITA has been amended to exempt from CIT income that is distributed to participants in approved collective investment schemes and private funds.

CIT rate adjustments 

• The income tax rate on profits derived from the export of non-traditional products and the value addition to copper cathodes has been increased to 20% from 15%.

Special Purpose Vehicles (SPVs)

• The ITA has been amended to clarify that tax incentives for SPVs carrying out Public Private Partnership (PPP) projects are applicable in the year when profits are first declared, followed by four consecutive years.
• In the case where an SPV carrying out PPP projects makes a profit in year one of operations and losses subsequently, the incentive will still lapse within the five-year period from the initial year of realising a profit.

Withholding tax (WHT)

Introduction of WHT exemption for royalties

A scope for exemption on royalties received by taxpayers has been introduced in the ITA. Previously, taxpayers receiving domestic royalty payments were subject to WHT at 15% with no possibility of an exemption provided for under the ITA.

Betting and lottery winnings

The WHT rate on winnings from gaming, betting (brick and mortar,) and lottery (brick and mortar) has been reduced to 15% (previously 20%). 

Prior to this amendment, the 15% WHT on winnings from gaming, betting (brick and mortar), and lottery (brick and mortar) was only applicable in the 2023 and 2024 charge years.

Rental income

Effective January 2022, rental income was taxed by way of turnover tax at the rate of 0% for gross rental income below 12,000 Zambian kwacha (ZMW), 4% for gross rental income between ZMW 12,000 and ZMW 800,000, and 12.5% for gross rental income exceeding ZMW 800,000.

Effective 1 January 2025, a 16% tax rate will apply for gross rental income exceeding ZMW 800,000 per annum.

Turnover tax

The turnover tax registration threshold has been increased. Turnover tax now applies to businesses with an annual turnover of up to ZMW 5 million (previously ZMW 800,000). The tax rate applicable has also been increased to 5% from 4%. 

However, the ZMW 800,000 threshold for rental income tax, artisanal and small-scale mining licence holders, and VAT remains unchanged.

Value-added tax (VAT)

Clarifying scope of cross-border electronic services

Section 8(6) of the VAT Act has been amended to clarify that imported services outside the prescribed scope of cross-border electronic services are taxable under the reverse VAT mechanism through an appointed agent.

Restriction of input VAT claim on invoices generated off the electronic invoicing system (Smart Invoice)

The VAT Act has been amended to include a restriction on input VAT claims on invoices issued outside the electronic invoicing system by taxable suppliers except where the Commissioner-General provides an exemption as prescribed.

Effective 1 January 2025, input tax claims are restricted to invoices issued from the Smart Invoice system or those issued by taxable suppliers exempted from using Smart Invoice. However, tax invoices issued outside the Smart Invoice system up to 31 December 2024 are valid for input tax deduction in 2025 if they meet the 90-day validity period and other mandatory features of a tax invoice.

Clarification of enforcement powers in VAT compliance

The 2025 amendment introduces a change in terminology, replacing the rank of ’Assistant Commissioner‘ with ’Assistant Director‘.

Customs and excise duties

The government has implemented a series of strategic amendments to customs and excise duties aimed at fostering sustainable development. These amendments are as follows:

Harmonisation of the Customs and Excise Duty Act with the Tax Appeals Tribunal Act

The Customs and Excise Duty Act has been amended to update references to the ’Revenue Appeals Tribunal‘ to the ’Tax Appeals Tribunal’, ensuring consistency with the Tax Appeals Tribunal Act of 2015.

The term ’Tribunal‘ now refers to the Tax Appeals Tribunal as per the Tax Appeals Tribunal Act, 2015, replacing the previous definition under the Revenue Appeals Tribunal Act, 1998.

Payment period for assessed duties

The payment period for assessed duties has been reduced from five days to three days.

The reduction from five to three days aims to enhance revenue collection efficiency and ensure prompt compliance with tax obligations.

Bonded warehouse clearance deadlines

The Customs and Excise Act has been amended to modify the deadlines for clearing goods from bonded warehouses.

Prior to this amendment, goods not entered for export or consumption within 15 days of the due date would be forfeited and could be sold or disposed of by the Commissioner-General. The recent amendment reduces this time frame from 15 days to 10 days.

Simplification of export procedures for low-value goods

The Act has been amended to exempt goods valued at or below the Kwacha equivalent of USD 2,000 from the requirement to submit a bill of entry or other prescribed documents prior to export.

Extended timeframes for in-bond carriage by rail

The timeframe for moving goods in bond by rail to customs area or another customs office for clearance or warehousing has been prescribed to be five days. 

However, goods transported in bond by rail must be entered for consumption or warehousing within 15 days. This change accounts for the longer transit times typically required for rail cargo.

Production of electrical energy

The Customs and Excise Act has been amended to include electrical energy (of not more than 100KW) as one of the goods that can be produced for personal and domestic use without a licence and without payment of excise duty. 

Suspension of excise duty on Internet services

Excise on Internet services supplied by Zambia Research and Education Network to a public institution, public research institution, public secondary school, or a public higher education institution has been suspended.

Penalties for excisable goods manufacturers

Specific penalties for licensed manufacturers guilty of offences under the Customs and Excise Act have been introduced. 

The penalties include fines up to three times the excisable value plus duty, a maximum of 20,000 penalty units (ZMW 8,000), imprisonment for up to five years, or a combination of these.

Excise duty increases on various products

• The excise duty on specified imported non-alcoholic beverages has been increased to ZMW 1.00 per litre from 60 Ngwee per litre. However, locally produced non-alcoholic beverages remain tax free.
• The excise duty on imported mineral water has increased to ZMW 1 per litre from 30 Ngwee per litre.
• The specific excise duty rates on cigars, cheroots, cigarillos and cigarettes, of tobacco or tobacco substitutes have been increased to ZMW 452 per mille from ZMW 400 per mille.
• The specific excise duty rates on water pipe tobacco, cutrag and other manufactured tobacco substitutes, homogenised or reconstituted tobacco, tobacco extracts and essences have been increased to ZMW 452 per kilogram from ZMW 400 per kilogram.

Separate tariff codes for soya bean cakes, husks, and other solid residues

Previously, soya bean cakes, husks, and other solid residues were classified under the same tariff code, 2304.00.00, and incurred a 5% customs duty and a 5% surtax, despite being distinct products with varying values and uses.

The amendment has broken these down into different products with separate HS codes:                    

• 2304.00.10 --- Oil cake, customs duty at 5%
• 2304.00.20 --- Soya husks customs duty at 5%
• 2304.00.90 --- Other solid residues customs duty at 5%

Property Transfer Tax (PTT)

Revised tax rates for property transfers

The PTT rate applicable to certain property transfers has been increased to 8% from 5%. The rate change is applicable on the transfer of land, shares, intellectual property (IP), and mining rights.

The rate applicable for the transfer of mining rights under mining licences and mineral processing licences remains at 10%.

Refined the definition of ‘intellectual property’

The definition of ’intellectual property‘ has been amended to align with the Acts dealing with patents, designs, trademarks, and copyrights.

Expanding PTT coverage and valuation basis on foreclosure property

Taxation of foreclosed properties has been revised to include building societies and money-lenders, with definitions for these entities aligned to their respective Acts. This inclusion ensures that all financial institutions involved in foreclosure-related property transactions are taxed uniformly.