Zambia

Employment income

Income derived from employment within Zambia is subject to taxation. This encompasses all forms of remuneration linked to services performed or roles held in the country, regardless of the payment's location or the payer's residence. Employers must withhold and remit taxes on these emoluments through the Pay-As-You-Earn (PAYE) system.

Scope of emoluments

The term 'emoluments' is broadly defined to include, but is not limited to, salaries, wages, overtime pay, commissions, bonuses, and pensions. It also covers any benefits or allowances that can be converted into cash or its equivalent.

Taxation of employee benefits

Benefits that can be monetised are considered part of the employee's taxable income and fall under the PAYE framework. Conversely, non-cash benefits, such as the provision of vehicles or housing by the employer, are taxed at the employer's level.

Skills Development Levy (SDL)

Employers are also obligated to contribute to the national skills development by paying a levy amounting to 0.5% of the total emoluments paid to employees each month.

Equity compensation

The allotment or acquisition of shares under a share option scheme that is approved by the Zambia Revenue Authority (ZRA) is exempt from income tax.

Specific rules for other share option schemes apply from 1 January 2014.

Business income

Business income is generally calculated on the same basis for individuals as companies (see the Corporate tax summary for more information).

Business income is generally determined in line with applicable accounting standards (excluding receipts of a capital nature). Expenses wholly and exclusively incurred for the purposes of the business are generally deductible, provided they are of a revenue nature rather than capital in nature.

Capital expenditure is disallowed, but capital allowances are available on qualifying capital items.

Capital gains

Zambia does not have a capital gains tax, and, except where provided otherwise in the Income Tax Act, capital gains are not subject to tax.

Dividend income

Zambian resident individuals are taxed on dividend income from both Zambian and non-Zambian sources.

In the case of dividend income received from a Zambian resident company, the WHT deducted on the payment of the dividend should represent the ‘final tax’, and the Zambian resident individual receiving the dividend should not be subject to additional income tax.

Interest income

Zambian resident individuals are generally taxed on interest income from both Zambian and non-Zambian sources.

From 1 January 2022, interest earned by individuals on interest earning accounts held at banks and institutions registered under the Banking and Financial Services Act, 2017 is exempt from tax.

From 1 January 2023, interest earned by individuals on interest earning on green bonds listed on the Lusaka Stock Exchange (LuSE) with maturity of at least three years is exempt.

In the case of other Zambian-source interest income, the WHT deducted on the payment of interest should represent the ‘final tax’, and the Zambian resident individual receiving the interest is not subject to additional income tax.

Rental income

From 1 January 2022, rental income is taxed by way of turnover tax at the rate of 0% for gross rental income below ZMW 12,000, 4% for gross rental income between ZMW 12,000 and ZMW 800,000, and 12.5% for gross rental income above ZMW 800,000 per annum. The tax is payable by the landlord.

Exempt income

As noted above, capital gains and non-Zambian source income (with the exception of dividends and interest) are outside the scope of income tax.

Exempt categories of income include:

• Lump sum payments withdrawn from an approved fund at retirement age, death, or permanent incapacity.
• Approved payments for injury or sickness.
• A scholarship, bursary, or maintenance for education.
• Alimony, maintenance, or matrimonial allowance.
• A pension received from an approved fund.
• A dividend declared from farming income for the first five years the distributing company commences farming.
• Ex-gratia payments to a spouse, child, or dependant on the death of an employee.
• Lump sum payments paid to an employee on loss of office on medical grounds.
• A dividend declared by a company listed on the Lusaka Securities Exchange to an individual.
• Dividends declared by a company engaged in the assembly of motor vehicles, motorcycles, and bicycles for five years from the declaration of the first dividend.
• Certain payments to government employees, members of the armed forces, etc.
• Pension benefit as defined by the Constitution.