On 29 October 2021, Zambia’s Minister of Finance and National Planning, the Honourable Dr. Situmbeko Musokotwane presented the 2022 Budget to the National Assembly of Zambia.
The theme for the 2022 Zambian Budget is: ‘Growth, Jobs and Taking Development Closer to the People.’
The important proposed fiscal changes are summarised below. All these measures will take effect on 1 January 2022, unless specified otherwise.
PAYE: Changes to the Exempt threshold
The exempt threshold has been raised from K4000 to K4500 per month for employees.
The new tax bands are as follows:
0 – 4500 will be taxed at 0%
4500-4800 will be taxed at 25%
4801-6900 will be taxed at 30%
Above 6900 will be taxed at 37.5%
Mineral Royalty: Introduction of deductibility of mineral royalty
Mineral royalty will be deductible for corporate income tax purposes.
Interest: Time limit on carrying forward losses
The period for disallowed interest deduction will be increased from 5 years to 10 years.
Property Transfer Tax
Transfers of mineral processing and other mine-related licenses will be subject to property transfer tax.
The applicable rate will be 10%.
Mineral Royalty
There will be an amendment to the mineral royalty determination in the medium-term to reflect a measure of both incremental and aggregate norm values.
As of now, it is unclear what the specific changes will be. More clarifications will be available in the soon-to-be-published Finance act 2022.
Corporate Income Tax – Suspension for Ceramic Manufacturing business
The 2022 Budget proposes that for people carrying on the business of manufacturing ceramic products for the charge years 2022 and 2023, the corporate income tax will be suspended
Corporate Income Tax – Rate
The 2022 Budget proposes a reduction of the standard Corporate Income Tax (CIT) rate to 30%.
Currently, the CIT rate is 35%.
However, it is to be noted that the top marginal tax rate for telecommunication companies will be maintained at 40%.
Corporate Income Tax – Extension of lowered CIT tax rates
The measure allowing for a lower CIT rate of 15% on income earned by hotels and lodges on accommodation and food services will be extended.
The period during which the lower rate will apply will be extended to 31 December 2022.
Currently, this lower rate is applicable until 31 December 2021.
Rental Income Tax
The budget provides that the turnover tax rate will be charged at 4% for rental income tax earners below K800,000 per annum.
For rental income above K800,000, the income tax regime for individuals or corporate will apply.
Currently, turnover tax is a tax that is charged on gross sales/turnover. Any person carrying on any business with an annual turnover of K800,000 or less is liable to turnover tax and a flat rate of 4% is charged for turnover tax.
At this stage, it is not clear how the Zambian government will amend provisions related to rental income tax. More clarifications will be available in the soon-to-be-published Finance act 2022.
Tax Exemption – Interest
The 2022 Budget proposes that interest payable to individuals owning bank accounts to be exempted from tax.
Reinsurance Premiums – WHT
20% withholding tax to be introduced on reinsurance placed with reinsurers not licensed in Zambia.
Presumptive Tax
Proposed revision of the presumptive tax bands upwards. The tax bands were last reviewed in 2018.
Vehicle Sitting Capacity:
- 64-seater and above -> Proposed Tax per Annum K12960 (currently K10800)
- 50 – 63-seater -> Proposed Tax per Annum K10800 (currently K9000)
- 36 – 49-seater -> Proposed Tax per Annum K8640 (currently K7200)
- 22 – 35-seater -> Proposed Tax per Annum K6480 (currently K5400)
- 18 – 21-seater -> Proposed Tax per Annum K4320 (currently K3600)
- 12 – 17-seater -> Proposed Tax per Annum K2160 (currently K1800)
- Below 12-seater -> Proposed Tax per Annum K1080 (currently K900)
Gambling – WHT on winnings
To enhance tax compliance, it will be mandatory for tickets to display withholdings tax payable on potential winnings.
Value Added Tax
Agriculture Sector
Zero-rated VAT on selected agricultural equipment and accessories.
- Manure Spreaders
- Balers
- Combine Harvesters
- Commercial Sprinkler Irrigation Systems
- Animal Feed Grinder/Mixer
- Pelleting Machines
- Sprayer
- Trailers of a specific HS code
- Dryers for agricultural products of a specific HS code
Energy Sector
Zero-rate on Solar Charge Control Units and Solar Street Lights.
Insurance Sector
Reintroduction of VAT at the Standard Rate on the property and non-life insurance.
Abolish the currently applicable insurance premium levy.
Booklets and newspapers
Reintroduction of the 16% VAT on booklets and newspapers.
VAT on mobile phones
VAT to be charged at the point of registration by the Zambia Information and Communications Technology Authority.
Currently, it is charged at the point of importation.
Customs and Excise
Energy
Customs duty on solar streetlights and solar charge control units to be reduced from 25% and 15% respectively to 0%.
Agriculture
- Cattle Breeding stock importation, the 5% duty to be removed.
- Day old chicks’ importation, the 5% duty to be suspended on specific stock.
Other
- Filler masterbatch, the 5% duty to be removed.
- Extension of suspension of customs duty on importation of refrigerated trucks to 31 December 2022.
- Extension of customs duty waiver on safari game viewing vehicles, tourist buses and coaches to 31 December This is however subject to other conditions.
- It was proposed to increase the exemption value of goods on which duty is not paid to US $500 from US $50 inclusive of freight and insurance for a single petty consignment. This excludes goods consigned through parcel post or air freight.
- For export duty on maize, it was proposed to remove the 10% duty. This measure will be effective as from 1 November 2021.
- 5% excise duty on coal
- Increase the specific excise duty on opaque beer to 50 ngwee per litre (packaged) and to one Kwacha for (unpackaged) from 15 ngwee
- Increase specific excise duty on cigarettes from 51 | P a g e the current K302 per mille to K355
Zambia Economic Zones
- Introduce zero percent tax for a period of 10 years from the first year of commencement of works in a Multi Facility Economic Zone or Industrial Park, on dividends declared on profits made on exports by companies operating in these economic zones.
- Introduce zero percent tax for a period of 10 years from the first year of commencement of works in a Multi Facility Economic Zone or Industrial Park, on profits made on exports by companies operating in these economic zones
- Reduce the threshold to US $50, 000 for a Zambian citizen to qualify for incentives provided under the Zambia Development Agency Ac
Non-tax revenue measures
- Increase fees charged by Road Transport and Safety Agency, Department of National Registration, Passport and Citizenship, Forestry Department and Seed Certification Control Institute.
- Reduce immigration permit fees under the Non-Governmental and Non-Profit Organisation category.
- Increase the Public Service Vehicles (PSV) driver’s renewal period from annually to every five years.
- Reduce visa fees of all categories by 50%.
Fiscal mobilization & other general measures
The Minister of Finance announced that revenue mobilization, administrative reforms, and expenditure rationalization measures will be taken to reduce the fiscal deficit.
The Minister also announced that the Government would streamline the tax system and place a high priority on fair and equitable taxation and establish a stable and predictable tax policy.
Lastly, Zambia’s Minister of Finance announced that Zambia plans to address base erosion and profit shifting to boost domestic revenues.
The Zambia Revenue Authority systems will be interfaced with the Government Bus and Payment Gateway system to improve compliance and minimize revenue leakages.
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