Zambia

Corporate - Income determination

Last reviewed - 17 May 2024

Zambia's CIT framework mandates separate taxation for distinct income sources, prohibiting loss offset across different income streams.

Business Income 

Taxable business profits from Zambian operations are aligned with the charge year, which typically spans from 1 January to 31 December. Companies may request an alternative accounting period from the Zambia Revenue Authority.

Inventory Valuation 

For CIT calculations, International Financial Reporting Standards (IFRS) guide inventory valuation.

Capital Gains 

Zambia does not operate a specific capital gains tax; however, Property Transfer Tax applies to the realised value of transferred property.

Dividend Income 

Dividends from foreign entities to Zambian companies attract CIT and are taxed separately. Tax treaties may offer relief, and unilateral measures can prevent double taxation. Dividends received from Zambian entities are considered final after Withholding Tax (WHT). For onward distributions, a tax credit equivalent to the WHT may be available to prevent double taxation.

Interest Income 

All interest income, regardless of origin, is subject to CIT. For Zambian-sourced interest, the recipient company's taxable amount includes WHT, which is creditable against the company's CIT liability. Notably, green bonds listed on the Lusaka Stock Exchange enjoy a 0% tax rate from 1 January 2023, provided they mature after at least three years.

Rental Income 

Effective from 1 January 2022, rental income is subject to a turnover tax with varying rates based on the gross rental income brackets.

Royalty Income 

CIT applies to Zambian-source royalty income, which encompasses a broad range of property usage rights. The recipient company's taxable amount includes WHT, creditable against its CIT liability. From 1 January 2023, software rental is considered royalty for tax purposes.

Partnership Income 

Partnership income is taxed at the individual partner level, reflecting the transparent nature of partnerships under Zambian tax law.

Unrealised Foreign Exchange Gains/Losses 

Unrealised gains and losses are not deductible for tax purposes. Taxable foreign exchange gains and deductible losses of a revenue are contingent on realisation, with certain capital nature exceptions.

Other Income Sources

Income from hedging and investment activities is also taxed under separate source taxation rules.

Foreign Income 

Zambian residents are taxed on foreign-sourced dividend and interest income, as well as income from international transportation services.

General Anti-Avoidance Rules (GAAR)

GAAR applies to transactions that understate taxable income or overstate non-deductible expenses in Zambia.