Zambia

Corporate - Significant developments

Last reviewed - 14 February 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.
  • 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.
  • Disallowance of VAT claims on specific supplies, except where such supplies are stock in trade.
  • 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.