Zambia has a source-based tax system in terms of which both residents and non-residents are subject to tax on income earned from a source in. In addition, resident companies are taxable on interest and dividends received from a source outside Zambia.
A company is resident in Zambia if:
- it is incorporated or formed under the laws of Zambia; or
- the effective management is in Zambia.
corporate tax rate
Resident companies and permanent establishments of foreign companies are subject to corporate tax at the rate of 35%.
Reduced rates apply to entities engaged in mining, farming, non-traditional exports and chemical fertilizer manufacturing, whereas an increased rate may apply to the electronic communication industry.
|capital gains tax (“CGT”)|
There is no capital gains tax in Zambia, however, a 5% property transfer tax applies on the transfer of immovable property and unlisted shares.
withholding tax (“WHT”) rates
WHT rate (%)
|dividends||15% (exemptions apply)||15% (exemptions apply)|
|management and technical services fees||15%||20%|
| || |
double tax agreements (“DTAs”)
DTAs are in force with Botswana, Canada, China, Denmark, Finland, France, Germany, India, Ireland, Italy, Japan, Kenya, Mauritius, the Netherlands, Norway, Romania, Seychelles, South Africa, Sweden, Switzerland, Tanzania, Uganda and the United Kingdom.
A new treaty with the Netherlands will become effective from 1 January 2019.
Losses may be carried forward for a period of five years.
Companies carrying on mining operations or hydro, solar or wind electricity generation may carry forward their losses for up to 10 years.
In terms of Zambia’s transfer pricing rules commercial or financial transactions between associates must be entered into on an arm’s length basis.
Two persons are associated if one of them participates, directly or indirectly, in the management, control or capital of the other, or if another person participates, directly or indirectly, in the management, control or capital of both of them.
In terms of Zambia’s thin capitalisation rules, for mining companies, the maximum accepted debt to equity ratio is 3:1.
For other companies, thin capitalisation is dealt with under the general transfer pricing rules. There is no specific guidance on the acceptable level of debt to equity ratio applicable to other industry sectors, but in practice, the ZRA generally allows a debt to equity ratio of 1:1. Depending on individual circumstances, it may be possible to negotiate with ZRA for an alternative debt to equity ratio.
The income tax rates applicable to resident individuals are:
|annual chareable income of residents (ZMW)||tax rate |
|up to 39 600|| 0%|
|39 601-49 200|| 25%|
|49 201-74 400|| 30%|
|over 74 400|| 37.5%|
Both employers and employees must make monthly social security contributions to the NAPSA.
Both the employer contribution and employee rate is 5% of an employee’s gross salary, limited to a maximum contribution of ZMW995 per month.
|payroll taxes||A skills development levy is payable by employers with an annual turnover exceeding ZMW800 000 at a rate of 0.5% on payroll.|
|stamp duty |
There is no stamp duty in Zambia, but a 5% property transfer tax applies to the transfer of immovable property and unlisted shares.
|taxable supplies |
VAT is payable on the supply of goods or services in Zambia and the importation of goods and services.
Any person who carries on business in Zambia and has an annual taxable turnover / expected annual taxable turnover exceeding ZMW800 000 in any relevant year or ZMW200 000 in any relevant quarter, must register for VAT purposes.
Businesses whose turnover is below the registration threshold may apply for voluntary registration, provided any other registration requirements are met.
|reverse VAT on imported services|
Resident companies are required to account for output VAT in respect of imported services rendered non-resident companies under a reverse-charge mechanism. There is no corresponding claim for the input VAT.
Alternatively, the non-resident supplier may appoint a “local agent” to account for the VAT on the supplies of the non-resident, in which case the local recipient should be entitled to claim an input credit.