On 1 January 2022, Zambia tax amendments acts came into force. These tax amendment acts were enacted in line with Zambia’s 2021 budget. The amendment acts provide for changes to the Zambian taxation landscape.
There are four fiscal acts:
- The Income Tax amendment act
- The Value Added Tax amendment act
- The Customs and Excise act
- The Property Transfer Tax act
We have summarised the key changes.
Income Tax Act
1. New definitions
“Commodity royalty” means an amount paid under royalty financing or a general agreement to a = person or partnership, by a person or partnership resident in the Republic that is computed by reference to the production, profit, or to the value of production from a mineral deposit or other natural resource in the Republic but does not include the repayment of the purchase price for the commodity royalty.
“Income generating real estate” means real estate properties that generate consistent recurring revenue in the form of dividends, interest, or cash distribution.
“Income real estate investment trust” means a collective investment scheme that invests primarily in income-generating real estate.
“Securities and Exchange Commission” means the Securities and Exchange Commission established under the Securities Act, 2016.
“Zambia Agency for Persons with Disabilities” means the Zambia Agency for Persons with Disabilities established under the Persons with Disabilities Act, 2012.
“Zambia Development Agency” means the Zambia Development Agency established under the Zambia Development Agency Act, 2006.
2. Change in words
The word “charities” has been substituted for “public benefit organisations”.
3. Deductions – Interest: Time limit for carrying forward
Interest on which a deduction is not allowed may be carried forward and treated as incurred during the next charge year.
However, this carrying forward was only possible for 5 years, and the interest should not exceed 30% of the tax earnings before interest, tax, depreciation, and amortisation.
This provision has been amended only for mining operations and for businesses generating electricity. The time limit was increased from 5 years to 10 years for those businesses.
4. New deduction – Mineral Royalty
Mineral royalty payable will be deductible for corporate income tax purposes.
5. Addition to the Commissioner’s General powers to assess
When carrying out assessments, they shall not include distributed income of an income real estate investment trust from which tax in respect of that charge year is deducted.
The Commissioner-General will also have the power to make a standard assessment requiring a person or partnership letting out property to pay tax on turnover at the rate of 4%.
6. Deduction of tax from certain payments – WHT
Two new payments have been added to the list of payments that require that tax be deducted before making any other deductions:
- Reinsurance premium to a recipient not registered in Zambia
- Distributed income of an income real estate investment trust (REIT)
The Income Tax Amendment Act also clarifies that:
- For winnings from gaming, lotteries and betting other than winnings received by an individual, it shall not apply to a payment of winnings from a brick-and-mortar casino.
- Distributed income of an income REIT is the gross rent collected by the REIT minus 25% of gross collections.
- Whereas before a return has to be submitted within 14 days of the end of the month in which payment is due, now a return should be submitted fourteen days of the end of the month in which the payment is made.
7. New presumptive tax rates for motor vehicles for the carriage of persons
The presumptive tax bands have been reviewed upwards. The last review was in 2018.
The new rates are as follows:
- 64-seater and above -> Tax per annum K 12,960
- 50 – 63-seater -> Tax per annum K 10,800
- 36 – 49-seater -> Tax per annum K 8,640
- 22 – 35-seater -> Tax per annum K 6,480
- 18 – 21-seater -> Tax per annum K 4,320
- 12 – 17-seater -> Tax per annum K 2160
- Below 12-seater (including taxis) -> Tax per annum K 1,080
8. Tax credit for persons with disabilities (clarified)
The income tax amendment act specified the requirements for people with disabilities benefitting from tax credit. The K 6,000 is only available for persons registered by the Zambia Agency for Persons with Disabilities.
9. Income threshold rates of tax for individuals
The new tax bands are as follows:
0 – 54000 will be taxed at 0%
54000 –57600 will be taxed at 25%
57600 – 82800 will be taxed at 30%
Above 82800 will be taxed at 37.5%
10. Corporate Income Tax – Rate
The CIT rate has been decreased to 30%.
This applies for companies other than an electronic communications network or service licensees. For these companies, the top marginal rate of 40% is maintained.
There is an exception and that is where the electronic communications network or service licensee’s income does not exceed 250,000 K, in that case only, the CIT rate will be 30%.
11. Corporate Income Tax – Deletion
CIT removal:
- The 35% CIT on income from mineral processing
- The 30% CIT on income from mining operations
Standard CIT rates of 30% now applies for both mineral processing and mining operations.
12. Corporate Income Tax – Income from trust, deceased’s estate or bankrupt’s estate
The CIT rate has been reduced to 30% CIT per annum. It was previously 35%.
13. Rental Income
Corporate income tax:
Rental income was previously taxed at 10%.
Under the income tax amendment act, the new rates are:
- If rental income turnover is less or equal to 800, 000 K -> Corporate income tax applies at the rate of 4%.
- If rental income turnover exceeds 800, 000 K -> Corporate income tax applies at the rate of 12.5%.
Withholding tax:
Rental income is subject to withholding tax at the rate of 15%.
WHT applies only to a person (including a company) or partnership appointed by the Commissioner-General as a withholding agent for rental income.
14. Corporate Income Tax – Accommodation and Food Services
There is an extension of the lowered CIT tax rates for accommodations and food services.
A lowered CIT rate of 15% is applicable.
Instead of ending on 31 December 2021, the period will be extended to 31 December 2022.
15. Corporate Income Tax – Ceramic Manufacturing business
People carrying on the business of manufacturing ceramic products for the charge years 2022 and 2023 will benefit from a suspended corporate income tax.
The rate applied will be 0%
16. Corporate Income Tax – Exports of a business enterprise carrying on manufacturing activities
People earning income from exports of a business enterprise approved by the Zambia Development Agency and carrying on manufacturing activities in a multi-facility economic zone or an industrial park shall benefit from a suspended corporate income tax.
Starting from the year of commencement of works and for the next 10 years -> Rate of 0%
Year 11 to year 13 –> Rate of 15% or half of the standard income tax rate
Year 14 and 15 -> Rate of 22.5% or three quarters of the standard income tax rate
Property Transfer Tax
17. Updated Definition of Property
Property means –
- a land in Zambia
- a share issued by a company incorporated in Zambia or a share issued by a company incorporate outside of Zambia where the company directly or indirectly owns at least 10% of the shares in a company incorporated in Zambia
- mining right or an interest in the mining right
- mineral processing licence or an interest in the mineral processing licence
- intellectual property
18. Property transfer tax – Mineral
Transfers of mineral processing and other mine-related licenses will be subject to a property transfer tax.
The applicable rate is 10% of the realised value.
19. Property transfer tax – Shares (clarification)
It was clarified that a transfer of shares is not liable to tax if the total value over a consecutive period of three years represents less than 10% of the total value of shares in the Zambian company.
Value Added Tax
20. Penalty for failing to issue a tax invoice
Instead of a standard penalty not exceeding three hundred thousand penalty units or to imprisonment for a term not exceeding three years for failing to issue a tax invoice.
The vat amendments act provides that:
(a) on a first offence, the penalty shall not exceed one hundred thousand penalty units
(b) on second offence, the penalty shall not exceed two hundred thousand penalty units
(c) third or subsequent offence, the penalty shall not exceed three hundred thousand penalty units or to imprisonment for a term not exceeding three years, or to both.
21. Penalty for failing to record each sale or transaction
The penalties for this offence have increased:
(a) on a first offence, the penalty shall not exceed one hundred thousand penalty units
(b) on second offence, the penalty shall not exceed two hundred thousand penalty units
(c) third or subsequent offence, the penalty shall not exceed three hundred thousand penalty units or to imprisonment for a term not exceeding three years, or to both.
