Zambia

Corporate - Significant developments

Last reviewed - 01 June 2022

Following the 2022 Budget announcements, below are some of the amendments to the tax legislation in Zambia with effect from 1 January 2022:

  • Increase in annual tax exemption threshold for pay-as-you-earn (PAYE) from 48,000 to 54,000 Zambian kwacha (ZMW).
  • Reduction of the standard corporate income tax (CIT) rate from 35% to 30%.
  • Suspending CIT on income from the business of manufacturing ceramic products for the charge years 2022 and 2023. 
  • Extending the reduced CIT rate of 15% on income earned by persons providing accommodation and food services to 31 December 2022.
  • Reducing the CIT rate on income from exports by a business, provided the business conducts its manufacturing activities in a multi-facility economic zone or an industrial park. The investors' export income will be eligible for the following incentives as of the commencement of construction works:
    • Income earned in the first 10 years are taxed at 0%.
    • Income earned in years 11 through 13 are taxed at 15%.
    • Income earned in years 14 and 15 are taxed at 22.5%.
    • After the 15th year, all income will be taxed at 30%.
    Additionally, investors will be eligible for a 0% withholding tax (WHT) rate on dividends declared from export income for a period of 10 years from the commencement of works.
  • Reforming the rental income tax regime. From 1 January 2022, rental income is taxed by way of turnover tax at the rate of 4% for gross rental income below KMW 800,000 and 12.5% for gross rental income above KMW 800,000 per annum. The tax is payable by the landlord. 
  • Increase in the presumptive taxes on motor vehicles for the carriage of persons.
  • Introducing WHT at the rate of 20% on reinsurance services from providers not registered in Zambia.
  • Clarification that the threshold for multinational entities (MNEs) to file a Country-by-Country (CbC) Report is consolidated group revenue of ZMW 4.795 billion.  
  • Mineral royalty payable under the Minerals and Mines Development Act, 2015 is now deductible for income tax purposes.
  • The period for carrying forward unutilised disallowed interest expenditure by mining companies and electricity generating companies is increased from five years to ten years.
  • The scope of property transfer tax is expanded to include transfer of mineral processing and interest in the mineral processing licence. The applicable rate is 10%.
  • Increase in insurance premium levy rate from 3% to 5%.
  • Imposing value-added tax (VAT) at zero on selected agricultural equipment, including spreaders, balers, combine harvesters, irrigation systems, animal feed grinders or mixers, etc. 
  • Extending zero-rating of VAT to solar streetlights and solar charge control units.
  • Imposing VAT at the standard rate of 16% on supply of booklets and newspapers.
  • Clarification that claims for import VAT should be supported by import bills of entry and any other documentary evidence of payment of tax as the Commissioner-General of the Zambia Revenue Authority (ZRA) may prescribe.  
  • Taxpayers can now issue invoices from their accounting software, provided the accounting system is integrated with ZRA’s Tax Management System.  
  • Increase in penalties applicable on failure to issue tax invoice from 30,000 to 100,000 penalty units (approximately ZMW 30,000) for first offenders; from 60,000 to 200,000 penalty units (approximately ZMW 60,000) for second offenders; and from 90,000 to 300,000 penalty units (approximately ZMW 90,000) or imprisonment for a term not exceeding three years, or both, for wilful evasion. One penalty unit is equivalent to ZMW 0.30.
  • Reduction of the excise duty rate from 125% to 60% on ethanol of an alcoholic strength by volume of 80% or higher.
  • Increase in the specific excise duty rate on unmanufactured tobacco and tobacco refuse from KMW 240 per kg to KMW 355 per kg.
  • Introduction of excise duty on coal at the rate of 5%.