Zambia

Following the 2023 Budget announcements, below are some of the amendments to the tax legislation in Zambia with effect from 1 January 2023:

Corporate income tax (CIT)

• Artisanal and small-scale mining are to be taxed under the turnover tax regime as opposed to CIT.

• Reduction of the CIT rate from 30% to 25% on income earned from value addition to gemstones through lapidary and jewellery facilities.
• Reduction of tax on income received by public private partnerships (PPPs) for the first five years that a project makes profit from 35% to 15%.

• Replacement of the current two-tier taxation system in the telecommunications sector with a single tax rate of 35%.

• Increase in the threshold for the allowable expenditure incurred in the construction of employee housing under the farm improvement allowance from 20,000 to 100,000 Zambian kwacha (ZMW).

• Introduction of income tax concessions on income generated from local sales of corn starch by agro-processing businesses operating in a Multi Facility Economic Zone.
• Expansion of definition of royalties to include rent of software for income tax purposes.
• Introduction of due date for the payment of a provisional return submitted by a person who registers after 31 March of any charge year. The due date for submission of the return shall be within 90 days from the date of registration.

Withholding tax (WHT)

• Removal of 20% WHT on reinsurance, including retrocession, from providers not licensed in Zambia.
• Reduction of the WHT from 15% to 0% on interest earned by individuals on loans by members of savings groups.
• Reduction of the WHT from 15% to 0% on investment income earned from life insurance funds.
• Exemption of interest income earned on green bonds listed on securities exchanges in Zambia.
• Reduction of WHT on winnings from gaming and betting from 25% to 15% for the 2023 and 2024 charge years.

Property Transfer Tax (PTT)

• Introduction of a PTT exemption with respect to the surrender or forfeiture of shares.
• Reduction of PTT on transfer of mining rights held by exploration companies from 10% to 5%.
• Enhancement of the definition of the realised value on disposal of distressed property by a financial services provider to incorporate the actual price paid for the transfer of distressed assets.
• Clarification in respect of the realised value with respect to indirect transfer of shares that the value that is subject to tax shall consider the proportion of the value that the Zambian company bears to the foreign company in whose shares are being transferred.
• Amendment to the definition of commercial property to include the sale of an interest in bare land being bought primarily for commercial use or the sale of an interest in (largely) bare land on which a small portion contains commercial property.

Mineral Royalty Tax (MRT)

• Amendment of the MRT regime to apply MRT on the incremental value in each price band as opposed to taxing the aggregate value at a fixed MRT rate after the price exceeds the respective threshold.
• MRT price bands to be adjusted accordingly with the reduction of the lowest marginal rate from 5.5% to 4% and the removal of the rate of 7.5%.

Value-added tax (VAT)

• Extension of VAT to special purpose vehicles (SPVs) for PPP projects.
• Reintroduction of VAT on petrol and diesel.
• Clarification on the three months within which a taxpayer can reclaim input VAT from ’three months‘ to ’ninety days‘ from the date of the tax invoice or the prescribed documentary evidence.
• Extension of claim on input VAT for intending traders to include ’tourism‘ where the intending trader is engaged in the development of a tourism facility or tourism infrastructure and is registered and licensed by the Zambia Tourism Agency.
• Increase in the penalties on evasion of taxes from 30,000 penalty units or ZMW 9,000 to 300,000 penalty units or ZMW 90,000.

Customs duties

• Suspension of customs duties on automatic teller machines (ATMs) imported by financial service providers licensed under the Banking and Financial Services Act.
• Suspension of customs duties on importation of waste management and recycling equipment.

• Suspension of customs duties on importation of items used by tourism enterprises in the furtherance of their business.

• Suspension of customs duties on imported petrol and diesel when purchased from a bonded warehouse by Oil Marketing Companies (OMCs).
• Suspension of customs duties on imported polymers and plastics used for the construction of greenhouses.
• Suspension of customs duties on importation of electronic communications fibre and devices where this is taken out of bond by a holder of a network licence issued under the Information and Communications Technology Act.
• Exemption from obtaining licence as a manufacturer for manufacturers of fruit or nut juices and mineral water.

Presumptive/turnover tax

• Introduction of turnover tax threshold and rental income tax of ZMW 12,000. This income will be taxed at the rate of 0% per annum with the remaining balance to be taxed at the applicable turnover tax or rental income tax rates.
• Reduction of presumptive tax on land-based betting companies from 25% to 15% for 2023 and 2024 charge years.
• Extension of use of electronic fiscal devices (EFDs) to taxpayers registered under turnover tax and presumptive tax on betting and gaming.
• Introduction of specific penalties for negligence, wilful default, and fraud with respect to presumptive tax on gaming machines and casino games (brick and mortar).

Transfer pricing

• Correcting the wording of the provision regarding the conditional filing of Country-by-Country (CbC) Reports in order to align the local provisions to the intention of the Organisation for Economic Co-operation and Development (OECD) guidelines on CbC Reporting requirements.
• Removal of the dual currency use in CbC Reporting provisions to the use of a single Zambian local currency threshold of ZMW 4,795 million.

Pay-as-you-earn (PAYE)

• Increase in annual tax exemption threshold for personal income tax (PIT) PAYE from ZMW 54,000 to ZMW 57,600 and adjustment to subsequent tax bands and respective tax rates.