• Introduction to taxation

• Definition of key concepts

• Principles of taxation, Classification of tax and
Elements of a tax system
• Overview of the ZRA and Tax administration in
Zambia
• Tax statutes and Zambia Revenue Authority (ZRA)
practice notes
• Administrative structure of ZRA
• Records, returns and obligations
 Introduction to Taxation

Taxation may be defined as the process of raising revenue for the Central
Government through levies on income and gains of resident persons.
A tax may be defined as a compulsory levy on income or gains of a person
resident in a particular country. Each country has a form of tax system.
Resident persons pay a proportion of their income or gains to the
government.
The Zambian government, like any other government raises its revenue
through taxes imposed on the income and gains of Zambian resident
persons.
Revenue generation for the central government

Taxes are levied in order to raise revenue for the central

government. This revenue is then used to meet public expenditure.
Public expenditure is the expenditure incurred by the central
government on the provision of public goods and services. These
public goods and services include the following:
Education
(1)

Health
(2)

Road network, among others.

(3)

Apart from raising revenue for the Central government, there are
other functions of taxation which include the following:
Influencing economic activity in the country
The government uses taxes to influence the level of economic activity in the country. This is done through giving tax
incentives to individuals and institutions that engage in activities that contribute towards economic growth. Examples
are the capital allowances given on implements, plant and machinery and on buildings. All these assets are used in the
conduct of business activity that leads to economic growth.

Re-distributing income and wealth

Some individuals generate more income than others. Those who generate more income get richer, while those who
generate less income get poorer. If this trend continues, the rich would keep on getting richer and richer while the poor
would get poorer and poorer. The government uses progressive tax systems to re-distribute income and wealth. This
prevents the poor from getting poorer and the rich from getting richer at the expense of the poor.

Maintaining the well-being of the environment

In some countries, heavy taxes are imposed on income and gains arising from activities which are not friendly to the
environment. Activities such as those contributing to global warming are discouraged using taxes levied on the income
or on the acquisition of assets used in the conduct of those activities.
Other sources of public revenue

There are several other ways through which the central government can raise revenue. These other ways include the
following:

Privatization of state owned enterprises

This is the process of transferring state owned enterprises to the private sector. Huge amounts of revenue can be raised
while there are state owned enterprises to sell. Once all the state owned enterprises are sold, it would mean there would
be no source of revenue for the government. Privatization cannot therefore be relied upon as the sole source of revenue
for the government.

Borrowing from the International Financial Institutions

The government can borrow from the International Monetary Fund (IMF) and the World Bank to finance certain projects
only. Amounts borrowed from these two institutions will normally have conditions attached to them and in addition, the
amounts have to be serviced, normally at high interest rates. The government may not have funds to repay these
amounts borrowed when they fall due. As such, it is not possible to rely only on borrowing from the international financia
institutions for the purpose of meeting all the recurring public expenditure.
Through issuing government securities/Domestic borrowing
Instead of borrowing from the international financial institutions, the government can be able to borrow locally through
the issue of government bonds and treasury bills as a means to raise short term finance for a specific purpose.

This method is costly. It leads to high interest rates and normally also causes inflation. Government can use this

Donor funding

Various donor agencies have been set up that provide funding to poor countries. However, these donors provide funds
for clearly defined projects and cannot provide the funds for the government to meet all the recurring public
expenditure. In addition, donors can only be able to provide the funds if the funds are available with them.

All these methods may not be as successful as raising revenue through taxes because the costs which would be
incurred to raise the revenue would be too high. If revenue is raised through taxes, the costs incurred are relatively
manageable.
These are known as the canons on taxation. The British economist Adam Smith (1723-90) first introduced the canons
of taxation, but they are just as relevant to modern systems. They are the principles that underlie effective and just tax
systems throughout the world and they are:
• The Convenience Principle: Taxation should bear as lightly as possible on production. Taxes should not be so high
that they make production very expensive. Taxes that bear heavily on production lead to lower production.

• The Economy Principle: Taxes should be easy and cheap to collect, and fall directly on the ultimate payer. Great
resources that are devoted to tax collection are simply wasted if the amounts collected are low.
• The Certainty Principle: Taxes should be certain. If tax rules are complex, they can be subverted and evaded. If tax
rules can only be understood by specialists, then only those tax payers who can afford to pay the specialists are
likely to comply with the rules. The tax rules should therefore be easy to understand.

• The Equality Principle: Taxes should bear equally so as to give no individual an advantage. This simply means that
taxes should be levied on the basis of ability to pay. If the taxes are not based on this principle, then persons in low
income groups will find the taxes to be more burdensome than those in high income groups.
• The Efficiency Principle: A tax must not hinder efficiency. Where it is not possible to achieve this, the tax should
involve the least loss of efficiency.
• The Compatibility Principle: A tax should be compatible with the foreign tax systems. In the case of Zambia, the tax
system should be compatible with the tax systems of the SADC and COMESA member states.

• The tax should automatically adjust to changes in the rate of inflation. As inflation keeps on rising and falling, the tax system
should automatically adjust to such rises and falls.
The main taxes found in Zambia and their incidence are summarized below:

Tax Incidence
Income Tax Chargeable on the income of all persons who are
resident in Zambia, provided they are not exempt

Property Transfer Tax Chargeable on the realised value of property

transferred in Zambia by a chargeable person who
is resident in Zambia

Turnover Tax Chargeable on the turnover of businesses whose

annual turnover is K800,000 and less

Presumptive Tax for Chargeable individuals and partnerships carrying

transporters on the business of passenger transport
Value Added Tax Chargeable on the value of taxable supplies made
by a taxable person in Zambia

Mineral royalty Chargeable on the norm value or gross value of

minerals produced by companies carrying on mining
operations in Zambia

Customs Duty Chargeable on the value for duty purposes of

imported goods and of certain exports.

Excise Duty Chargeable on the value for duty purposes for excise
duty of locally produced goods and services and
certain imports
Classification of taxes
Taxes can be classified as direct taxes, indirect taxes, capital taxes, revenue taxes, progressive taxes, regressive
taxes and proportional taxes as follows:

Direct taxes
These are taxes that are levied directly on the income and gains. Normally a percentage of the income or gain is paid
in the form of a tax. Examples of Direct taxes in Zambia are:
• Income Tax
• Turnover Tax
• Property Transfer Tax
In general, direct taxes are progressive. As a result, the amount of tax payable is dependent on the level of income.
The higher the income level, the higher the tax and the lower the income level, the lower the amount of tax. Persons
whose income levels are low, therefore, will not pay the same amount of tax as those whose income levels are high.

Indirect taxes
These are taxes that are imposed indirectly. They are expenditure taxes and therefore, they are borne by consumers.
Traders who are registered for charging indirect taxes charge these taxes on the supplies they make and collect the
tax on behalf of the Zambia Revenue Authority (ZRA). The indirect tax collected must be paid to ZRA by set date. The
amount of indirect tax payable does not depend upon the level of income of the consumer. Both those who are in the
low income group as well as those who are in the high income group pay an equal amount in the form of taxes. An
example of an indirect tax is Value Added Tax (VAT).
• Capital taxes
These are taxes on capital receipts. A capital receipt is an amount of receipt resulting from a disposal of a capital item.
An example of a capital tax in Zambia is Property transfer Tax.
• Revenue taxes
These are taxes which are levied on revenue receipts. A revenue receipt is a receipt arising from a sale of a non-
capital item. Items acquired with a view to subsequent resale are non- capital items. When they are sold, the amount
received is a revenue receipt or income and is subjected to a revenue tax. An example of a revenue tax is income tax.
• Regressive taxes
These are taxes that represent a smaller proportion of a person’s income as the income of that person rises. The
average rate of tax falls. Value Added Tax is a regressive tax because the rate of Value Added Tax is the same on the
good whether that good is bought by a person with high income or by a person with low income such that the rate of
tax becomes higher the lower the income of the person.

• Progressive taxes
These are taxes that represent a larger proportion of the person’s income as that person’s income rises. The average
rate of taxation rises as income levels rise. The rates of tax for lower income levels are less than the tax rates for
higher income levels. Income tax is generally an example of a progressive tax where it is levied at different tax rates
such that low income is taxable at lower rates. In Zambia, this is the case concerning personal income tax. Lower
income is chargeable at lower tax rates and higher income is chargeable at higher tax rates.

• Proportional taxes
These are taxes where the percentage of income paid in taxation always stays the same. The average rate of taxation
is constant irrespective of the level of income.
Regulatory and Legal Framework

Operation of a tax system requires rules and regulations. These rules and regulations form tax law.

The statutes

The source of tax law is the statute. Statutes or Acts of parliament will make it legal for taxes to be levied. In Zambia,
the main statutes include the following:

• The Zambia Revenue Authority Act under which the Zambia Revenue Authority is set up.

• The Income Tax Act that governs income tax in Zambia

• The Value Added Tax Act that governs VAT

• The Customs and Excise Act that governs customs and excise duties

Statutory instruments
These are a form of delegated legislation issued by a Government Minister. Statutory Instruments related to tax
matters are issued from time to time by the Minister of Finance and economic planning. The statutory Legislation
empowers the Minister to make orders to give effect to legislation.
Case law

As already pointed out, there is no common tax law. Judges cannot make tax law. Decided cases in taxation will assist
with the interpretation of a particular statute which relates to the specific circumstances of a case. Taxing acts are a
special form of statute demanding a strict or predictable form of interpretation. Over the years, certain broad principles
have been laid down as follows:

• The words of the act must be given their natural meaning.

• Where there is doubt as to meaning of a statutory provision, the taxpayer must be given the benefit of the doubt.

• The tax must be clearly imposed on the taxpayer by the terns of the statute.

• There is no equity in taxation.

Practice Notes These are issued by the Zambia Revenue Authority to indicate the ZRA’s Interpretation of a
statute. The practice notes are normally issued following amendments to taxes acts.
Other publications of the Zambia Revenue Authority

These are not sources of law, but are intended to provide education to tax payers about various tax issues. The main
publications include the following:
(1) Booklets

(2) Leaflets
(3) Postings on the web site.

Charge year

Amendments to statutory provisions are made generally every charge year following the proposals made by the
Minister of Finance and National Planning in his or her budget speech. A charge year is a year for which tax is
chargeable. It is a year of assessment. Income and gains arising in a particular charge year are taxable in that charge
year.

In Zambia, a charge year runs from 1st January to 31st December. For example, the year from 1st January 2024 to 31st
December 2024 is the charge year 2024

The charge year is very important when dealing with income tax as amendments to the income tax act generally take
effect from 1st January.
Introduction to Income Tax
Income tax is a tax on income. It is chargeable in Zambia on the income of all persons who are resident in
Zambia on the income derived from Zambian sources and income derived from deemed Zambian sources.

Brief history of Income Tax in Zambia

There was no tax in the world in the very early days. Governments had no social responsibility to provide
any public goods and services to the citizens. Citizens were able to provide for themselves all they needed
in order to survive.

There were many wars at that time. Clans fought against the neighboring clans and nations fought against
the neighboring nations in the hope of acquiring the neighbors' land.
At the time of the Napoleon wars in Europe, the British Government decided to come up with a measure of
raising revenue for the army. This was in the form of tax on income at very low rates. The rate of tax on
income was about 5% at most. The introduction of tax on income was intended to be only a temporal
measure.

The residents were levied this tax without major problems. After the wars had ended, the government
realized that the system was very efficient as huge amounts of revenue was collected from the residents.
As a result, the system of tax on income was made permanent and tax rates had to rise gradually to
marginal rates of about 98%. The rates then dropped to reasonable rates which are currently prevailing.
When Northern Rhodesia was colonized by Britain, the system of tax on
income was extended here. Individuals who were in employment were
required to pay the tax. After independence, the system of tax on income
continued to apply as previously.

Apart from income tax, new taxes were introduced in the United Kingdom
such as Corporation Tax and capital Gains Tax. To date, these other taxes
are not available in Zambia. May, be, if they had come into existence before
Zambia became independent, they could have been extended here as well.

The term income tax is therefore used to mean a tax that is levied on
income and not on capital. Classifications of income are discussed later in
this book. This does not mean that there are no taxes on capital. There are
various forms of taxes on capital.
Persons who are liable to Income Tax

Income Tax is chargeable on the income of persons who are resident and ordinarily resident in Zambia. The term
person refers to individuals and persons other than individuals, such as Zambian companies. The term residence
applies to both the taxable individuals and other taxable persons. The Income Tax Act states how to establish the
residence status in respect of individuals as well as in respect of persons other than individuals.

Individuals
Three concepts apply to individuals. These are the concepts of residence, ordinary residence and that of domicile.
Individuals are chargeable to income tax in Zambia when they are resident in Zambia, whether or not they are
domiciled in Zambia. Each concept is now addressed below:

Residence
An individual is resident in Zambia if he or she is physically present in Zambia for a period of not less than 183 days in
a charge year. For example, if Mr. Ali is physically present in Zambia for 183 or more days in the charge year 2020, he
will be resident in Zambia for that charge year.

Ordinary Residence

Individuals who normally live in Zambia are resident and ordinarily resident in Zambia. Individuals who come to Zambia
with the intention of remaining here for more than 12 months are deemed to be resident and ordinarily resident in
Zambia from the date of arrival.
Domicile

This concept relates to the place which an individual refers to as the permanent home. A person is domiciled in the
country that is his or her permanent home. The two types of domicile are domicile of origin and domicile of choice.

Domicile of origin

Domicile of origin is the domicile acquired at birth. This means that individuals are domiciled in the country in which
they are born.

Domicile of choice

Domicile of choice is the domicile that is acquired by choice. Individuals can be able to make a choice as to what
country should be their permanent home once they attain the age of sixteen years. The concept of domicile may affect
the amount of income that will be assessed on a taxable individual where such an individual has income from all over
the world, provided that the individual is also resident. Individuals who are domiciled in Zambia would be liable to
Zambian income Tax on their worldwide income whether the foreign income is remitted to Zambia or not, unless the
income is specifically exempt from income tax. However, the system applicable in Zambia is to assess income to tax if
it has a Zambian source. As a result, the foreign income may not be assessed in Zambia if its source is deemed to be
not a Zambian source. Individuals who are domiciled in Zambia, but not resident in Zambia are not chargeable to
Zambian income tax. Zambian domiciled individuals are only chargeable to Zambian income tax when they are
resident in Zambia.
Persons other than individuals

Persons other than individuals include companies, trusts and estates. In respect of persons other than individuals, only
the concept of residence applies. Ordinary residence and domicile are not applicable. These persons will be restricted
to companies for the purposes of curse 208 – Principles of Taxation.

Residence
A company is resident in Zambia if:

• That company is incorporated or formed in Zambia, or

• The place of effective management of the company is in Zambia.

The place of effective management is the place where key management and commercial decisions that are necessary
for the conduct of the enterprise's business are in substance made. So, if this applies to a company that is not
incorporated in Zambia, then that company is resident in Zambia.

Therefore, all companies that are incorporated or formed in Zambia are resident in Zambia.

All companies that are not incorporated or formed in Zambia are resident in Zambia if the places of their effective
management are in Zambia.
Persons that are exempt from Income Tax

Persons who are not resident in Zambia are exempt from Zambian Income Tax. Certain Persons are exempt from
Zambian Income Tax although they are resident and ordinarily resident here. These Persons include:

• The Republican President on the Income received as President

• Chiefs in respect of the income received from the government

• Local Authorities

• Approved Funds

• Commonwealth Development Corporation

• Club, Society or association organized and operated only for social welfare or recreation, and improvement etc, if
its income may not be received in any way by a member or shareholder.

• Registered trade Unions

• Political parties registered as a statutory society under the societies Act

Taxable and Exempt Income
Income that is liable to tax is Income that arises from a source within Zambia or deemed to be within Zambia.

Taxable income includes the following:

• Rental Income from letting of property in Zambia

• Profits or gains derived from a business

• Emoluments from holding an office or from being employed.

• Interest from Banks and Building Societies

• Loan and Debenture interest

• Dividends

• Royalties received

• Income received by way of annuities

Certain Income is exempt from tax. Examples are:
• Scholarships or bursaries payments for education and maintenance
during education.
• The emoluments of the Republican President which are received as a
result of holding that office.
• The emoluments of chiefs, including those of the Litunga of Western
Province.
• War disability pensions.
• Income received by way of grant as pension benefits upon the expiry of a
fixed contract of employment or upon termination of employment for an
employee who had been engaged under pensionable terms.
• Income received in conjunction with the award of military, police, fire
brigade or as an old age pension paid out of public funds, or as a benefit
paid under any written law in respect of injury or disease suffered in
employment.
Administration of taxes

Taxes in Zambia are administered by the Zambia Revenue Authority. The Ministry of Finance is
responsible to formulation of the role of the Zambia Revenue Authority and the Ministry of finance

The Zambia Revenue Authority (ZRA) was established on 1st April 1994 as a corporate body, under the
1993 Act of Parliament. Under this Act, ZRA is charged with the responsibility of collecting revenue on
behalf of the Government under the supervision of the Minister of Finance.

The Authority was created to redress the serious shortfall in revenues available to the Government and the
increasing dependency on donor funding to support basic necessities.

Hence, the goal of the Zambia Revenue Authority is to maximise tax compliance and increase domestic
revenue yield in Zambia by instituting a fair, efficient and effective tax regime.

The Zambia Revenue Authority is also expected to advise the government on matters of taxation policy.
This is so to ensure that tax revenue is maximised.
ZRA’s Mission Statement

The mission of the Zambia Revenue Authority is to maximise and sustain revenue collection through integrated,
efficient, cost effective and transparent systems, professionally managed to meet the expectations of all stakeholders.

This mission statement underpins the main responsibilities of the Authority which are to:

• Properly assess and collect taxes and duties at the right time without causing undue burden to the public
• Encourage the public to present themselves forward and pay tax voluntarily
• Ensure that all monies collected are properly accounted for and timely banked
• Properly enforce all relevant statutory provisions
• Give advice to Ministers on aspects of tax policy
• Facilitate international trade

The pledge of ZRA to the taxpayer is to ensure impartial and equitable treatment as regards:

• Supply of forms (for VAT and Direct Taxes)

• Information that will assist in complying with the law Fairness
• Courtesy
• Prompt and efficient service
Privacy and confidentiality of all personal and financial information
ZRA’s Organization composition

The Zambia Revenue Authority is an autonomous body headed by the Commissioner General and is supported by
three Commissioners. The Commissioners head the following divisions: Domestic Taxes, Customs Services, and
Corporate Services.

There are also four other support divisions headed by Directors. These are Research & Planning, Human Resource,
Internal Audit and Finance. The treasury functions are incorporated in the Finance Department under the Corporate
Services Division.

There is also an Internal Affairs unit under the Commissioner General’s office that looks at staff integrity.

The two divisions responsible for tax related matters are as follows:

The Domestic Taxes Division

This division is responsible for the administration of Income Tax, Property transfer tax and Mineral Royalty Tax, Excise
duty and domestic Value Added Tax. In as far as VAT is concerned, the division grants registration for VAT purposes to
eligible traders so that they are able to charge VAT on their taxable supplies and pay that VAT to ZRA The Division is
headed by the Commissioner – Domestic taxes.
The Customs Services Division
This is the division that has been set up to deal with Customs duty and import VAT. It is headed by the Commissioner
Customs Services. The functions of the division are as follows:

• To collect and manage Customs and Excise duties and other duties, licensing and control of warehouses and
premises for the manufacture of certain goods.

• To regulation and control imports and exports.

• To Facilitate trade, travel and movement of goods, and

• To Provide statistical data to the Government on imports and exports

Powers of the Commissioner General

• Power to request a return to be submitted at any time,
•
• Power to request accounts and documents to be submitted for examination,
•
• Power to examine any person for the purpose of obtaining information,
•
• Power to search and seize money, documents and property.
The Ministry of Finance
This is the government ministry that is responsible for mobilizing the financial resources needed by the government
and allocating them to other ministries, provinces and other spending agencies. The ministry supervises the Zambia
Revenue Authority in ensuring that the authority collects tax revenue that it is expected to collect in a given period of
time. The ministry of finance has a mission statement.

The mission statement for the Ministry of Finance is: “To effectively and efficiently coordinate National Planning and
Economic Management, mobilize and manage public financial and economic resources in a transparent and
accountable manner for sustainable National Development.”

This mission statement targets at achieving sustainable performance levels in resource mobilization and management
of public financial and economic resources for the benefit of the people of Zambia.

Tax Payer Identification Number (TPIN)

Individuals as well as persons other than individuals are required to obtain Taxpayer Identification Numbers (TPIN)
from ZRA. All Individuals who hold a bank account with any bank or registered financial institution in Zambia are
required to obtain a TPIN. This applies to individual who are in employment and whose only source of income is
employment. The TPIN is a unique computer generated number available for collection by the tax payer as a
certificate. It is the number by which every taxpayer will be identified by the ZRA. The TPIN is essentially the
taxpayer’s tax account number in relation to which the taxes are collected from that tax payer.
Methods of collecting direct taxes

Income tax is a tax on income, and not on capital. It does not therefore apply on capital transactions. It is chargeable In
Zambia on the income that arises or deemed to arise from a source that is within Zambia. Income tax is collected
using many methods which include the following:

(1) Pay As You Earn (PAYE)

PAYE is a method of collecting Income Tax at source from individuals in gainful employment. The employer will deduct
the amount of tax from his/her employee’s salary or wages on each pay day and then remit the tax to the Authority.
This method enables the employee to avoid paying taxes at the end of the charge year and also shifts the burden of
responsibility to the employers
Income tax deducted from emoluments under the Pay as You Earn system is payable not later than the 10th day of the
month following that in which the income tax was deducted.

The advantages of collecting income tax under the PAYE system are as follows:

It ensures that there is continuous inflow of tax revenue to the government throughout the tax year. This is because
income tax deducted from emoluments under the system is payable every month as employees are generally paid on
a monthly basis.

It reduce the tax burden that would arise if employees were to be asked to pay huge amounts of income at the end of
the tax year. At the end of each tax year, employees would be failing to pay the income tax as they would not be
having the income to enable them pay income tax. Income will have been consumed in the course of the tax year as it
was earned.
It ensures that employees do not evade income tax. This is because the employer deducts the income tax form the
emoluments at source.

The disadvantage of collecting income tax under the PAYE system are as follows:

The main disadvantage of using the PAYE system to collect income tax from employees emoluments is that it would
act as a disincentive to hard work if the income tax rates are perceived by individuals to be high. This would lead to
individuals leaving employment and taking up other income generation activities whose income is not subjected to the
PAYE system.

(2) Withholding Tax

Withholding Tax (WHT) is deducted at source from certain sources of investment income which include: rents, interest,
dividends, royalties, and so on. The current rates of WHT on investment income and whether the withholding tax is the
final tax or not are provided in the table under the introduction to income tax.

Withholding tax is payable by the person who deducts it from a payment. The due date is the 14th day following the
end of the month when the income was paid.

The advantages of using the withholding tax system to collect tax at source are similar to those of using the PAYE
system explained above
(3) The Self Assessment system
Self assessment system applies in Zambia. Self assessment is a system of collecting tax under which returns are
issued to tax payers to enable them make their own assessments. These assessments made by the tax payers
themselves are the self assessments. Each tax payer includes the amount of taxable income for a given year in the
relevant return, together with the tax thereon. A return of provisional income is issued at the start of the tax year to
enable the tax payer estimate the taxable income and tax for that tax year. The estimated taxable income is known as
provisional income while the estimated income tax payable is known as provisional income tax.

Provisional Tax

Provisional Tax is a quarterly advance payment of income tax due based on provisional income for the current year.
Any person in receipt of income, other than emoluments subject to PAYE, is required to pay provisional tax on the
following dates:

Instalment number Quarter ended Due date

First instalment 31 March 10 April
Second instalment 30 June 10 July
Third instalment 30 September 10 October
Fourth instalment 31 December 10 January in the
following year
The amount of provisional tax payable is an estimate of the income tax for a given charge year on the estimated
income. Once that charge year has ended, the income tax should be computed based on the actual taxable income
earned in the charge year. The balance of income tax for any given charge year is due on 21 June following the end of
that charge year. The balance of income tax is the income tax for the charge year less provisional income tax already
paid.

For the tax year 2024, the dates when provisional income tax is payable are

Instalment number Quarter ended Due date

First instalment 31 March 10 April 2024
Second instalment 30 June 10 July 2024
Third instalment 30 September 10 October 2024
Fourth instalment 31 December 10 January 2025
The balance of the income tax in respect of the charge year 2020 should be paid not later than 21 June 2024.

The main advantages of the provisional tax system are:

(i) There is inflow of revenue to the government throughout the year.

(i) The burden on the part of the tax payer is reduced as the huge amount of tax will not be payable at once at the end
of the charge year.

The actual amount of income tax will be known at the end of the tax year when all the necessary information is
available. The balance of income tax, if any, is payable not later than 30th September following the end of the tax year
to which it relates.

There is a balance of income tax if the actual amount of income tax for the tax year exceeds the provisional income tax
already paid.
(4) Turnover tax
This is a direct tax chargeable on the taxpayer’s turnover for a given tax year. It is payable by all person running
businesses, other than excluded person, whose annual turnover is not more than K800,000. Excluded persons are
partnerships, persons carrying on transport businesses and persons making taxable supplies who opt to register
voluntarily for Value Added Tax. The turnover must not be made up of excluded income. Excluded income is
consultancy income and any income that is subjected to final withholding tax.

Turnover tax is a form of presumptive tax. The term turnover tax is used to refer specifically to tax on turnover to avoid
confusion with presumptive tax on persons carrying on the business of transporting passengers.

Turnover tax is calculated on a monthly basis and paid not later than the 14th day following the end of the month to
which the tax relates. A tax payer can make an election to pay turnover tax on a quarterly basis. If this is the case, the
due date for payment of turnover tax is the 14th day following the end of the quarter to which the tax relates. Persons
who are required to pay turnover tax are excluded from payment of provisional income tax.

(5) Presumptive tax for transporters

Presumptive tax is a fixed amount tax payable per annum. It is chargeable in cases where it would be expensive to
collect income tax on profits in the normal way as well as in cases where there would be tax evasion if income tax was
to be collected on the profits in the normal way. Individuals and partnerships carrying on businesses in the transport
sector, for transportation of passengers, are liable to pay presumptive taxes, based on the seating capacities of their
transportation vehicles. The tax is payable on a daily basis.
Individuals and partnerships carrying on businesses in the transport sector, for transportation of passengers,
are liable to pay presumptive taxes, based on the seating capacities of their transportation vehicles.

The current amounts of presumptive tax are as follows:

Sitting capacity Amount of tax per vehicle (per annum)

K
64 seater and above 10,800.00
50–63 seater 9,000.00
36–49 seater 7,200.00
22–35 seater 5,400.00
18–21 seater 3,600.00
12–17 seater 1,800.00
Below 12 seater (including taxis) 900.00
To make the amounts more affordable, the following seven categories of daily tickets have been provided
for:

Sitting capacity Tax per day

64 seater 29.60

50–63 seater 24.70

36–49 seater 19.70

22–35 seater 14.80

18–21 seater 9.90
12–17 seater 4.90

Below 12 seater (including taxis) 2.50

Presumptive taxes for transporters do not apply to Limited companies running public passenger
transportation businesses. Such businesses are assessed under company income tax on profits.
(6) Base Tax

This applies in situations where the determination of the taxable values would be difficult, usually because there is no
reliable information upon which an assessment would be made. The base tax is the minimum amount that would be
collected from a taxable person is such situations. Currently, base tax is K365 for the tax year 2024.

(7) Tax Returns and Assessments

Every person who receives income has a duty to give notice to the Commissioner General of having received such
income. Such notice should be given within thirty days of the receipt of the income. The person is required to give the
TPIN with the notice.
Penalties and interest

Penalties are chargeable for late or underpayments of taxes as well as for late submission of returns. Most of the
penalties are standard and they apply to all the direct taxes equally and in some cases, to other taxes as well.

The General Penalty

A general penalty is chargeable in cases where no specific penalty has been prescribed. The amount of general
penalty is currently 100,000 penalty units or imprisonment for a term not exceeding twelve months or both. The
offences in relation to which the general penalty would apply are as follows:

(i) failure to furnish a full and true return;

(i) failure to keep records, books, accounts or documents;

(i) failure to produce any document for the examination or inspection of the Commissioner General;

(i) failure to attend at a time and place as required by any notice served on the taxpayer;

(i) failure to answer any questions lawfully put to them; and

(i) obstructing or hindering any officer acting in the discharge of his/her duty under the Income Tax Act.
The Commissioner General is empowered to impose fines in cases where a taxpayer has committed an offence under
the Income Tax Act and the taxpayer has agreed to the imposed fine in lieu of prosecution.

The maximum fine that can be imposed is 100,000 penalty units. As such, the Commissioner General may, where
satisfied that a person has committed an offence for which the penalty does not exceed 200,000 penalty units or where
a person has admitted that they have committed an offence under the Income Tax Act for which the penalty does not
exceed 200,000 penalty units, summarily demand from the person the payment of the fine not exceeding 100,000
penalty units in respect of the offence.

The Commissioner General shall inform the person from whom the fine is being demanded of that person’s right to
admit or dispute liability and the person may then exercise their right to admit liability or dispute liability. The agreement
or dispute of liability by the taxpayer should be in writing and addressed to the Commissioner General.

The payment of a fine shall operate as a bar to any further criminal proceedings against the person making the
payment in respect of the offence concerned.

The offences for which this fine may be imposed are those (cited in Section 99 of the Income Tax Act) whose penalty
does not exceed 200,000 penalty units in relation to which the general penalty would apply.
Late and underpayments of tax

If income tax is paid late, or underpaid, the penalty is 5% of that income tax per month or part thereof. This penalty
applies to all direct taxes.

This penalty runs from the due date of payment of income tax to the date of actual payment. In the case of late
payments of Value Added Tax, the penalty is 0.5% of the outstanding Value Added Tax for each day that the tax
remains outstanding.

Interest on overdue tax is charged at the Bank of Zambia discount rate plus 2% per annum. The interest is calculated
on the income tax, Value Added Tax or any other tax that is paid late. Interest on overdue tax runs from the due date of
payment of tax to the date when payment is actually made.

If the amount of provisional income tax paid is less than the actual total income tax for the tax year by at least one
third, then an additional penalty at the rate of 10% of the underpaid income tax. To avoid such a penalty, taxpayers
should keep on monitoring their affairs during the tax year and ensure that revisions are made to their return of
provisional income whenever circumstances change.

The self assessment income tax return should be submitted on or before 21st June following the end of the tax year.
The balance of income tax, if any, should also be paid on or before that date
Late submission of returns

If the self assessment income tax return is submitted late, the amount of penalty charged depends on whether the tax
payer is an individual or a person other than an individual:

(i) Where the tax payer is an individual, the penalty is 1,000 penalty units (K300) per month or part thereof and

(i) Where the tax payer is a person other than an individual, for example, a company, the penalty is 2,000 penalty
units (K600) per month or part thereof.

The penalty for late submission of Turnover Tax returns is 250 penalty units (K75) per month or part thereof.

For submitting incorrect Turnover Tax returns, the penalties are at the rates of 1.5%, 3%, and 4.5% of the amount of
turnover tax where the reason for submitting the incorrect return is negligence, wilful default and fraud respectively

If the VAT return is submitted late, the daily penalty is the higher of:

(i) 0.5% of the outstanding Value Added Tax, and

1,000 penalty units (K300)

Other penalties and fines

Other penalties and fines are summarized below:

(a) The penalty for failing to attend the proceedings of the Tax Appeals tribunal as provided for in the Act, or failing to
attend without reasonable excuse, or refusing to answer questions put to that person is 5,000 penalty units.

(b) Unauthorized disclosure of information contrary to Section. 8 of the Income Act is punishable by:

(i) Imprisonment for a term not exceeding two years, or

(ii) A fine not exceeding 200 penalty units, or

(iii) Both, imprisonment and a fine

© Penalty for fraudulent returns is:

(i)Imprisonment for a term not exceeding three years, or

(ii) A fine equal to 300,000 penalty units, or

(iii) Both, imprisonment and a fine.

Status of penalties

Penalties charged under the income tax act for failing to comply with the obligations have the same status as income
tax. They are therefore not allowable expenses in the computation of taxable profit for the following or any other
period.

Objections and Appeals Procedure

The Income Tax Act makes provision for dealing with disputes arising from Assessments and determinations as
follows:

Within 30 days of the issue of an assessment, a taxpayer may notify the Commissioner General of his objection in
writing. Beyond this period, the objection will be considered late. The Commissioner General may make a
determination either allowing or disallowing a late objection. If he declines, the taxpayer may appeal to the Tax
Appeals Tribunal on the grounds that the Commissioner General’s determination was unreasonable. The
Commissioner General is required to inform the taxpayer of his decision regarding the objection.

If the taxpayer is dissatisfied with the Commissioner General’s decision, he may within 30 days of the Commissioner
General’s notice, lodge an appeal with the Tax Appeals Tribunal. The Appeal to the Tax Appeals tribunal may be on a
point of law or fact or both point of law and point of fact.

Where either party to the dispute are not satisfied with the decision of the Tax Appeals Tribunal, they may appeal to the
Supreme Court which is the highest court in Zambia. The appeal to the Supreme Court shall be on a point of law only.
The Tax Appeals Tribunal

This is a statutory body set up under the Tax Appeals Tribunal Act (2015) to hear and determine:

(a) appeals from decisions of the Commissioner General under the Customs and Excise Act, the Income Tax Act, the
Property Transfer Tax Act, the Value Added Tax Act and other tax legislation; and

(b) any matter prescribed by the Minister, by statutory instrument, to be a matter against which an appeal may be
made under the Acts referred to above.

The Tribunal shall consist of seven members appointed by the Minister as follows:

( a) three legal practitioners of ten years or more standing recommended by the Judicial Service Commission and
who have sufficient knowledge of, and experience in, tax matters;

(b) two qualified accountants certified as such by the Zambia Institute of Chartered Accountants; and

© two persons from the business community.

.
The Minister shall appoint a Chairperson and Vice Chairperson from amongst the members who are legal
practitioners.
The chief administrative officer of the tribunal is the registrar who is responsible for:

• issue summonses;

• keep a record of the proceedings of the Tribunal;

• keep, or cause to be kept and maintained, a register of orders and judgments of the Tribunal;

• have the custody, and keep an account, of fees and other moneys payable or paid to the Tribunal, and shall keep
proper accounts of the moneys;
• subject to any rules made under this act, hear and determine interlocutory applications; and

• have such other functions and exercise such other powers as may be conferred by rules made under section
eighteen of the Tax Appeals Tribunal Act.
•
 The quorum of the tribunal is three, of which one should be an accountant. At any meeting of the
tribunal, there shall preside:

• The Chairperson,

• In the absence of the Chairperson, the Vice Chairperson,

• In the absence of the Chairperson and the Vice Chairperson, such member as the members present may elect for
the purpose of that meeting. Such a member must be a legal practitioner.

The appeal to the tribunal shall be made in writing and shall be lodged with the Registrar of the
Tax Appeals Tribunal within thirty days from the date of decision or determination and shall state:

• Details of the decision appealed against,

• The date of the decision,

• The office giving the decision,

• The grounds for appeal,

• Any other information as the tribunal shall require

.
For VAT a taxable supplier may make an appeal on decisions or determinations made by the
Commissioner General in relation to:

• Registration or cancellation of registration or refusal to register a supplier.

• The tax assessed to be payable on any supply of goods or services or

the importation of any goods.

• The amount of any input tax that may be credited to any taxable supplier.

• The application of any rule providing for the apportionment or

disallowance of input tax;

• Any notice requiring early payment of tax or security

Summary of penalties and fines

Situation Amount of penalty or fine When applicable

Any default or General penalty of an amount of Applies when no any other penalty is
offence 100,000 penalty units or provided for
imprisonment for a term not
exceeding 12 months or both

Failure to attend TAT 5,000 penalty units When a person summoned to appear
proceedings, or before the TAT fails to do so and
refusal to answer where a person refuses to answer
questions in TAT questions put to him.

Unauthorised Imprisonment for a term not When there is unauthorised

disclosure of exceeding two years, or disclosure of information contrary to
information A fine not exceeding 200 s.8 of the Income Tax Act
penalty units, or
Both, imprisonment and a
fine

Submitting Imprisonment for a term not When a taxpayer submits a

Fraudulent returns exceeding three years, or fraudulent income tax return under
A fine equal to 300,000 the self- assessment system
penalty units, or
Both, imprisonment and a
fine.
Omission of income 17.5% of omitted income, if due When employer negligently, willingly
chargeable under to negligence; 35% of omitted or fraudulently omits income from
PAYE income, if due to willful default PAYE assessments.
and 52.5% of omitted income if
due to fraud.

Submitting incorrect 1.5% of turnover tax if caused by When a taxpayer chargeable to

Turnover Tax negligence; 3% of turnover tax if turnover tax submits an incorrect
returns due to willful default and 4.5% of return
turnover tax if due to fraud.

Late submission of Where the tax payer is an When a taxpayer submits an income
income tax returns individual; 1,000 penalty units tax return after the due date.
(K300) per month or
part thereof and

Where the tax payer is a

person other than an
individual; 2,000 penalty units
(K600) per month or part
thereof.
Late submission of 250 penalty units (K75) per When a Turnover Tax return is
turnover tax return month or part thereof submitted late.

Late submission of Daily penalty taken as higher of: When a VAT return is submitted late.
VAT returns 0.5% of the outstanding
Value Added Tax, and

1,000 penalty units (K300)

Late and under Daily penalty of 0.5% of the When VAT is paid late.
payments of VAT unpaid VAT
Failing to avail Daily penalty of 2,000 fee When a person fails to avail
records units requested records within a
stipulated time
Availing incomplete Penalty of 20,000 penalty When any of the stated offences are
records, failure to units committed.
provide records for Additional daily penalty of
inspection, failure to 2,000 fee units may apply
provide information where there is a failure to
within stipulated avail records.
time