Zambia operates a source-based tax system. Both resident and non-resident companies are subject to corporate income tax on all income of a revenue nature accruing from a source within or deemed to be within Zambia. 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 central management and control of its business or affairs are exercised 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 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.
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.
The transfer pricing rules in Zambia grant the commissioner general power to adjust profits from commercial or financial transactions between associates to reflect arm’s length conditions.
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.
With the exception of companies carrying out mining operations, which are subject to a debt to equity ratio of 3:1, 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, in general, for individuals effective 1 January 2017, 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 are obliged to contribute 5% of an employee’s gross salary, limited to a maximum contribution of ZMW894.61, to the National Pension Scheme Authority.
|payroll taxes||With effect from 1 January 2017, employers with an annual turnover exceeding ZMW800 000 are liable to a skills development levy at a rate of 0.5% on payroll.|
|stamp duty |
There is no stamp duty in Zambia, but a 5% property transfer tax applies on the transfer of immovable property and unlisted shares.
|taxable supplies |
VAT is payable on any taxable supply of goods or services in Zambia and the importation of goods and services into Zambia.
Every supplier carrying on business in Zambia whose taxable annual turnover exceeds ZMW800 000 in any relevant year or ZMW200 000 in any relevant quarter, must apply for VAT registration.
Voluntary registration for companies with a turnover below the above threshold is allowed.
|reverse VAT on imported services|
Output VAT is to be declared by a recipient of services rendered by a foreign service provider 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.