Tax Information

This is a method of deducting tax from employees’ emoluments in proportion to what they earn. Under this system, the employer is empowered to:

a) calculate tax payable by every employee

b) deduct tax due from the emoluments, and

c) remit tax deducted to ZRA

The term “emoluments” means total earnings of an employee from employment. These include wages, salaries, overtime, leave pay, commissions, fees, bonuses, gratuities and any other payments from employment or office. (Section 2 of IT Act).

Under the PAYE system, the amount of tax which the employer deducts from any pay depends on:

• The employee’s total gross pay
• The applicable tax rates;

Example: 
For an employee with a gross pay of K 15, 000.00 / month in January 2024 – which is month 1 under the Tax Tables – tax will be calculated as follows:

a)  Calculation of Taxable Pay (K)

Gross pay                                                      15,000.00
Taxable pay                                                   15,000.00

b) Calculation of tax

First                                                               K 5, 100.00    @    0%       –          0

Next                                                              K  2,000.00    @    20%    –    K 400.00

Next                                                              K 2, 100.00     @    30%    –   K 630.00

Balance                                                         K 5, 800.00     @ 37%    –   K 2,146.00

Total tax due                                                                                              K  3,176.00

Total tax payable                                                                                        K 3,176.00

c) Calculation of Net Pay

Gross Pay                                                               K 15, 000.00

Less tax                                                                  K 3,176.00

Net pay to employee                                            K 11,824.00

The tax deducted must be remitted to ZRA by the 10th day of the subsequent month.

When you leave your current employment obtain a form showing all pay – roll details (ITF/P13 (2) from your former employer. This enables your new employer to deduct the correct tax deductions when you are re – employed. If the ITF/P13 (2) is not provided to your new employer, the tax deductions could be higher than you should suffer.
If you are not re-employed, you may be entitled to a tax refund as explained below.

A tax refund may arise in the following situations:

a) Errors: 

Pay-roll errors, for example;

• use of wrong tax bands and rates
• arithmetical errors in calculating tax
• complete or partial omission of statutory deductions

b) Unemployment Repayments:

If employment ceased at any time, but before the end of the charge year, unemployment repayment may arise due to incorrect use or non-use of tax tables.
This repayment is part of the tax that you may have paid during the tax year in which the employment is terminated.

You will be required to complete an Income Tax Return for Individuals (ITF/1A) which is available at all Direct Taxes Front Office Centers or indeed from the ZRA website (Click here). Please attach the following documents:

• letter of termination of employment
• copy of NRC
• last pay-slip
• particulars of employee leaving (form ITF/P13 (1)); and
• Any other payment vouchers. This will enable the tax office to calculate the refund of tax due. A notice of advice (assessment ITF302) will then be raised and availed to you.

Upon receipt of notice of assessment, the claimant should complete a Refund Claim form (ITF/ CF56 to complete the process for the payment of the refund.

Refunds are posted in the availed bank account.

Not all taxes paid will be refunded. ZRA will refund to the extent of payroll errors and overpayment of PAYE.

If tax is not remitted on time, the employer will be charged a penalty of 5% and an interest of 2% above the BOZ discount rate on the amount due.

Yes, all allowances and cash benefits are taxable except:

• Labor day awards;
• Ex Gratia payments;
• Medical expenses;
• Funeral expenses;
• Sitting allowances for councilors; and
• Benefits that cannot be converted into cash such as free residential housing owned and provided by the employer, canteen expenses, and personal to holder cars.

Where an employer pays the liability of an employee such as rent, electricity, telephone, water bills, school fees or professional association fees, club membership fees and similar payments, the employer is required to add such payments to the employees emoluments and deduct tax under PAYE.

Yes. They are taxed using tax tables for casual workers and daily paid workers.

Click here for tax tables

Local employees of such missions or organizations are not exempt from paying taxes. Individual employees will be registered for PAYE Direct Payments and pay taxes due.

Value Added Tax may be defined as a consumption-based tax that is levied in the supply chain at each point were value is added to a good or service. Since it is consumption based, the primary legal way of avoiding VAT is by not consuming any goods or services that are standard rated. The other is by consuming only zero-rated or exempt supplies.

By its nature, Value Added Tax is incurred by the final person in the chain of supply who is not registered for VAT. Persons registered for VAT will claim back, through the return, the input VAT incurred in the course of their business, and remit to Zambia Revenue Authority, the Output VAT collected in excess of their input VAT. Therefore, registered suppliers do not pay VAT.

STANDARD RATED SUPPLIES: These are supplies that attract VAT at the prescribed standard rate 16%.

ZERO RATED SUPPLIES: These are supplies that attract VAT at 0%.

EXEMPT SUPPLIES: These are supplies that do not attract any VAT at all.

Income tax is tax charged on income.

The following constitutes income:

• gains or profits from any business for whatever period of time carried on;
• emoluments;
• annuities;
• dividends;
• interest, charges and discounts;
• royalties, premiums or any like consideration for the use or occupation of any property; and
• income from the letting of property.

Section 2 of the Income tax Act defines assessable income as the amount of a person’s income liable to tax which may be included in an assessment and which remains after allowing the deductions, to which that person is entitled under the provisions of the Act. The assessable income is returned in an annual income tax return in accordance with section 46(1), 46(2) and 46(3) of the Income tax Act.

The provisions of the Act dealing with returns (in particular Sections 46 and 47) do not apply to taxpayers covered by Section 64A (2). Section 64A (2) excludes from Income tax, persons with turnover of K800, 000.00 and below. This part prescribes the documents and other supporting documentation, which should be submitted with the returns in order for the Commissioner-General to determine with reasonable accuracy, the assessable income and the tax due. Part V also deals with penalties that are charged on late submission of returns. Section 64(a) empowers the Commissioner-General to estimate tax due from a person in the event that they fail to submit an Income Tax Return. Section 64(b) empowers the Commissioner-General to estimate tax due from a person in the event that their return is unsatisfactory.

Legally speaking, the return must be accompanied by a Tax Computation, section 46 (2) (b).

Part IV (Sections 29 to 44) of the Income tax Act provides guidance on what items of expenditure are allowed to be deducted in ascertaining the taxable business profits. Generally speaking, the Income Tax Act allows as a deduction the following:-

(a) Expenditure incurred wholly and exclusively for the purposes of the business (S29)
(b)Revenue and not capital expenditure (S29)
(c)Losses brought forward from the same source, provided that a loss can only be carried forward for a period of five years (S30)
(d) Capital allowances, Investment allowance and Development allowance (S33 and 34)
(e) Approved fund deductions (S37)
(f) Payments in respect of technical education (S38)
(g) Subscriptions to professional bodies of knowledge relevant to the business(S39)
(h) Donations to approved public benefit organizations (S41)
(i) Revenue expenditure on Research (S43)
(j) Deductions for bad and doubtful debt and deduction for employing a handicapped person (S43A and S43D)
(k) Any other deductions as prescribed by Section 44.

The sufficient condition is that except for capital allowances, all this expenditure must not be capital in nature.

Under the Income Tax Act, all taxpayers in receipt of income, other than emoluments from employment or office, are required to make advance payments in the course of the tax year, on account of their estimated tax liability. This estimated liability is referred to asProvisional Tax . The return should contain:

– An estimate (based on information reasonably believed to be true) of the person’s income liable to tax;

– A computation of tax based on the rates of tax applicable for the charge year;

– A declaration by the taxpayer that it includes a full and reasonable estimate of his income for the charge year.

– The deadline for the submission of the provisional tax return is as follows:
(i) in the case of an electronic return, not later than 31st March of the charge year to which the return relates; and
(ii) in the case of a manual return, not later than 5th March of the charge year to which the return relates; and
(iii) in the case of a person who registers after 31st March of the charge year, within 90 days from the date of registration for Income Tax.

–  – Late return submission will attract penalties.

– – If at any time during the charge year, there are some changes in the business affecting the estimated income, the taxpayer is allowed to submit an amended provisional return.

– Where it is discovered that the taxpayer had under estimated his income by one third or more, penalties are chargeable.

– Provisional Tax is due and payable on the following dates in the charge year:

1st installment − 31st March, payable by 10th April
2nd installment − 30th June, payable by 10th July
3rd installment − 30th September, payable by 10th October
4th installment − 31st December, payable by 10th January

Annual Income Tax returns accompanied by financial statements are to be submitted by 21st June following the year under review.

When a taxpayer who has been paying Provisional Income Tax discovers that his annual turnover will not exceed K800, 000.00 during the year, he shall notify the Commissioner General immediately. However, he shall continue to pay Provisional Income Tax till the end of that particular charge year and shall be assessed under the Income Tax System. At the end of the year, the taxpayer will be required to submit a Turnover Tax Return and a set of accounts with supporting documents covering the whole year.

Part XI of the Income Tax Act (covering sections 106-114) deals with the right of taxpayers to react to an assessment raised as above. Section 106 states, Subject to the Commissioner-General’s power relating to assessment, every assessment under this Act shall stand good unless proved otherwise by the person assessed upon objection or appeal under this part. This means that if the assessment does not accurately reflect the tax liability of a person, the person must produce evidence to this effect (i.e. object) within thirty days and the assessment may be amended (Section 108).

If the taxpayer is unsuccessful, he/she may appeal to the Tax Appeals Tribunal (TAT) for further determination.

Withholding Tax is not a tax but a means of collecting that tax. Withholding Tax is deductible from a payment by the person who is liable to make payment (the payer) at the point in time the person to whom it is due to be made (the payee) becomes legally entitled to it (date of accrual). The payer is required to pay the tax deductible to the Zambia Revenue Authority by reference to the date of accrual no matter how, when or where payment is made.

• Dividends – Section 81
• Payments to Non – Resident Contractors – Section 81A
• Payments under Section 82A
  • Interest
  • Royalties
  • Management Consultancy Fees
  • Public Entertainment Fees
  • Commissions

Withholding tax will be due at the earlier of the following:

• The time when the payment is paid;
• The time when the payment accrues to a person; and
• The time when the payment is in any way due to a person or held to that person’s order or on their behalf, or it is in any way disposed of according to that person’s order or in that person’s favor.

The due dates for filing of returns and payment of Withholding tax is on the 14th day after the month of transactions.

Note: Both the return and payment are due on the same date.

The Property Transfer Tax Act Cap 340 provides for the charge of Property Transfer Tax on the transfer of property.

Property is defined as:

• Land, including any improvements on it
• A share issued by a company incorporated in the Republic or a share issued by a company incorporated outside the Republic where the company directly or indirectly owns at least ten percent of the shares in a company incorporated in the Republic.
• Mining rights or interest granted under the Mines and Minerals Development Act and include −
  • prospecting licence;
  • a large scale mining licence;
  • a large scale gemstone licence;
  • a prospecting permit;
  • a small scale mining licence;
  • a small scale gemstone licence; and
  • an artisans mining right.
• Intellectual Property such as trademarks, patents and brands.

The value of the property liable to charge is:

• If it is land, the open market value, or
• If shares, the net realizable value or nominal price whichever is greater.
• If a mining right, the actual price of that mining right or interest.

The term “transfer”:

(a) in relation to land, excludes

• letting or sub-letting
• leasing, under-leasing or sub-leasing, for a period of less than five years;

(b) in relation to a share, excludes – the allocation of the same by the company to the member in whose name it is first registered but includes transfers of property within a group of companies whose holding company is incorporated in Zambia.

The rate of tax applicable on the transfer of land or shares is 5% and 10% for a mining right.

Where a person transfers his property to a member of his immediate family, the Realised Value of such property is the actual price, if any received by transferor.

The term “Immediate Family” means, with respect to the person transferring the property: “a spouse, child, duly adopted child or step-child”

Where, within a group of companies, a company transfers property to another company (other than a company which is not resident in Zambia) within the group for the purposes of internal organization of the group, the Commissioner General may treat such transfer as having no Realised Value.The term group of companies means a holding company together with its subsidiary companies but excludes a situation where there is common shareholding.

Holding company means:

• a company that holds the majority of the voting rights in another company;
• is a member of another company and controls the majority of the voting rights on its own or pursuant to an agreement entered into with the other members; or
• is a member of another company and controls and has the right to appoint or remove a majority of the board of directors in that other company.

(1) The following organizations are exempt from Property Transfer Tax:

• The Government of the Republic of Zambia;
• Any foreign government;
• Any international organization, foundation or agency as the Minister of Finance may approve for the purpose;
• Any charitable organization or trust registered under section 41 of the Income Tax Act Cap 323;
• Any co-operative society registered under the Co-operative Societies Act is exempt from tax in that particular charge year when it is exempt under the requirements of the Income Tax Act;
• A Local Authority;
• Registered Trade Unions;
• Any Club, Society or Association registered under Section 41 of the Income Tax Act as a charitable organisation or as the Minister may approve for the purpose;
•  Approved Pension Fund and Medical Aid Society;
• Employees` Savings Scheme or Fund;
• Any Political Party registered as a statutory society under the Societies Act.

Other Exemptions

(2) Shares or stocks that are listed on a stock exchange duly registered under the Securities Act, e.g. the Lusaka Stock Exchange, is exempt from property transfer tax. Listed shares are those that are readily transferable or disposable on that Stock Exchange.

(3) Contributions towards the equity of a company:
The Commissioner General may treat the transfer of property by a shareholder of a company incorporated under the Companies Act, as having no realizable value, if such transfer is his contribution towards the equity of that company.
However, for exemption applications involving the transfer of shares or other properties in a re-organization, proof of ownership of the number of shares held must be made by attaching the relevant share certificate.

Under section 10 of the Property Transfer Tax Act, any determination or assessment for PTT may be objected to or appealed against by any affected person.

Objections against PTT assessments must be made in writing stating the grounds for objection. If the grounds of objection are not satisfactory, the assessment will be upheld. However, a taxpayer has a right to appeal to the Revenue Appeals Tribunal should they be dissatisfied with the Commissioner General’s determination.

There will be instances when a transaction is aborted for various reasons well after the tax has been paid and a tax clearance has been issued. Such cases will be refunded upon application. Applications for refunds will be scrutinized to ensure that the tax was actually paid. The following documents will be required:

• Original Tax Receipt
• Original Tax Clearance Certificate
• Original PTT Certificate
• Any proof that the transaction did not take place, (e.g. confirmation from the Registrar of Lands and Deeds)
• Formal letter of sale from the vendor, or their legal representatives

The following documents will be required:

• Copies of NRC for both the buyer and seller (in the case of individuals)
• A Certificate of Incorporation ( in the case of limited companies) or a certificate of registration (in the case of a Partnership);
• State consent to assign
• Seller’s and buyer’s TPINs
• Contract of Sale/ Deed of Transfer or Gift
• Legal practitioner’s certification (where the legal practitioner is representing both parties; letters of administration or probate for deceased cases; and valuation report ( where ZRA requests for valuation report).

• Share Transfer Form 18
• PACRA form 3
• Latest financial statement of the company in which the shares are held
• Shareholders` resolution
• Return form
• TPIN for seller and for the buyer
• Identification number for both the buyer and seller
• Contract for sale
• Certificate of share capital
• Certificate of incorporation.

Group companies seeking nil transfers via internal re-organisations, will have to provide evidence of the existence of a group structure by presenting a Share Ownership certificate and will require to meet the definition of a group.

Excise Duty is a tax on particular goods or products whether imported or produced domestically, imposed at any stage of production or distribution, by reference to weight, strength or quantity of the goods or products, or by reference to their value.

• Tobacco and manufactured tobacco substitutes such as Cigarettes
• Clear Beer
• Opaque Beer
• Hydrocarbon oils such as petrol, diesel, fuel oils and Liquefied Petroleum Oils(LPG)
• Spirits and Wines
• Electrical energy
• Air time
• Cosmetics e. beauty and skin care products
• Plastic Bags

• In order for any person to manufacture any of the goods set out in the Excise Tariff in quantities above the minimum quantities specified in the Customs and Excise Act,   he/she must apply to the Commissioner General for a license, with the exception of Mobile Phone service providers and Oil Marketing Companies.However, any person may produce without a license and without payment of duty for domestic use but not for sale or dispose for profit to any other person, the following goods:
  • Fermented liquor, other than opaque beer, containing not more than 2% of alcohol by volume.
  • Tobacco in form of cigars, cigarettes, pipe tobacco or snuff when made from manufactured tobacco on which duty has been paid or from raw tobacco.
  • Opaque beer being not more than twenty-three decalitres in volume in any period of four consecutive days.

Any person manufacturing, distilling, mixing, brewing or packaging the following:

1. 1. Any portable liquid containing more than two per centum of alcohol by volume
   2. All types of spirits and wines
   3. Opaque beer in containers exceeding twenty-three dekalitres
   4. Cigarettes, cigarette tobacco, pipe tobacco, cigar and sniff
   5. Hydrocarbon oils and their by-products
   6. Electrical energy
   7. Cosmetics
   8. Plastic Carrier bags

Application forms for License to Manufacture Goods subject to excise duty or surtax can be obtained from our Zambia Revenue Authority (ZRA) website www.zra.org.zm or visit Indirect Taxes – Tax Payer Services on the 1^st floor of Revenue House or any other ZRA office near you.

1. An applicant for a license should state and provide:
   • the nature of goods to be manufactured;
   • the process of manufacture;
   • the cost structure and selling price of the goods;
   • The premises and equipment to be used in manufacturing of excisable goods;
   • The business, its shareholding, assets, related businesses and accounting practices; and
   • Such other matters as the Commissioner General may require.
2. Approval of application for a license is at the discretion of the Commissioner General.

Any person whose application has been rejected or whose license has been revoked has the right to appeal to the Tax Appeals Tribunal.

• Submit returns and make payments on or before the 15^th day of the month following that month to which the return relates
• Keep books of Accounts recorded in English language for inventory, production and sales.
• Display the license at the manufacturing premises.
• Application for excise license renewal should submitted to Zambia Revenue Authority before or on 30^th September each year.

If a licensee fails to comply with the requirements of the law, the license may be suspended or cancelled.

• Late payment of tax and late submission of returns will attract interest at the prevailing Bank of Zambia rate plus (2%) per centum per annum and penalties of 1000 penalty fee units with an additional 1000 penalty fee units for each day the return is late respectively.

This is a tax applicable to persons where the Commissioner-General has no information to estimate one’s income as stipulated under Section 64 of the Income Tax Act. The amount of tax due per charge year is Three Hundred and Sixty-Five Kwacha (K365).

This tax is payable by persons who are not in a position to determine their income but do earn some form of income. Base tax arises from an estimated assessment which may not be a final tax as ZRA can raise another assessment if there is information on one’s actual or closer to actual tax liability.

No returns are required to be completed because this is estimated tax by the Commissioner-General as prescribed by the Income Tax Act.

Yes, one can pay for Base tax in one installment for the whole year. Base tax is due by 31^st December of any charge year and payable by the 21^st of June following the end of the charge year to which the tax relates.

The Insurance Premium levy is a tax imposed on all insurance premiums for all classes of insurance business excluding re-insurance and commissions earned on brokerage.

With effect from 1st January, 2016 Act number 21 of 2015 provides for a three percent (5%) levy on premiums for all classes of insurance business excluding re-insurance.
However, the commissions that are earned on insurance brokerage are not subject to a charge of the levy because commissions are not classified as insurance business. The brokers merely facilitate or act on behalf of the insurer and the insured.

The Insurance Premium levy is charged at the rate of 5% on premiums for all classes of insurance business excluding re-insurance.

The return filing due date for Insurance Premium Levy is the 18th day of the month following the end of the prescribed period and the due date for payment of the Levy is also the 18th day of the month following the end of the prescribed accounting period.

This amendment changes the due date for the payment of Insurance Premium Levy to the 18th day from the 14th day of the month following the end of the prescribed accounting period to align with the return filing due date for the Insurance Premium Levy return.

NOTE:
For a return in the period ending 31st December 2018, the submission due date shall be 18th January 2019 while the payment will be due on 14th January 2019. This is because the return and corresponding payment for December 2018 relates to the 2018 accounting year.

The obligation to remit the levy lies with the insurer, insurance agent or broker.

Where a payment is made in 2015 for the 2016 cover or where an invoice is issued in 2015 for the 2016 contract period.

The insurance premium will be deemed to have been paid in January 2016 and the levy shall be paid by 14th February 2016.

The Value Added Tax Act will apply in enforcement and administration of Insurance Premium Levy for the following:

• Recovery of the levy
• Filing of returns
•  Assessments
• Keeping of records
• Furnishing of information and production of documents
• Delegation of authority
• The appointment of authorised officers
• Penalties and sanctions
• Reviews and appeals and
• The priority of tax debts in bankruptcy.

Note: One penalty unit is equal to K0.30

Mineral Royalty is a payment received as consideration for the extraction of minerals.

a) All taxpayers with mining rights from the ministry of Mines and Mineral Development;

b) Any person without a mining right but in possession of minerals on which mineral royalty has not been paid by the supplier of the minerals;

c) All persons carrying out quarrying of industrial minerals are liable to mineral royalty; this includes the quarrying of gravel, clay and sand; and

d) All persons that mine minerals for use as inputs or raw materials in their manufacturing process are also liable to mineral royalty;

Minerals are classified in five categories as follows:

a)      Base metals – are non – precious metals that are either common and/or  more chemically active, including iron, copper, nickel, aluminium, lead, zinc, tin, magnesium, cobalt, manganese, titanium, scandium, vanadium and chromium

b)      Energy Minerals – are naturally occurring substance in the earth’s crust used as a source of energy and includes coal, uranium and any other minerals used to generate energy but does not include petroleum

c)      Gemstones – these are non-metallic substances used in jewellery and they include amethyst, aquamarine, beryl, corundum, diamond, emerald, garnet, ruby, sapphire, topaz, tourmaline and any other non – metallic substance, being a substance used in the manufacture of jewellery that the Minister by statutory instrument declares to be a gemstone.

d)     Industrial Minerals – these are  rocks or minerals other than gemstones, base metals, energy minerals or precious metals used in their natural state or after physical or chemical transformation and includes but is not limited to barites, dolomite, feldspar, fluorspar, graphite, gypsum, ironstone, when used as a fluxing agent kyanite, limestone, phyllite, magnesite, mica, nitrate, phosphate, pyrophyllite, salt, sands, clay, talc, laterite, gravel and any other  mineral classified as an industrial mineral by statutory order

e)      Precious Metals – these are high value metals and include gold, platinum, silver, palladium and selenium.

Calculation of Mineral Royalty is based on the two methods below:

a) Gross Value

Gross value is applicable to the following:

• • Industrial Minerals;
  • Energy Minerals; and
  • Gemstones.

Under this method of calculation, Mineral Royalty is calculated based on the Gross Value of the minerals produced. For purposes of computing Mineral Royalty, gross value is defined as the realizable price for sale Free on Board at the point of export in Zambia or point of delivery within Zambia.

b) Norm Value

Norm Value is used to calculate Mineral Royalty of:

• • Base metals; and
  • Precious metals.

Mineral Royalty is calculated based on the:-

• • The monthly average London Metal Exchange cash price per metric ton multiplied by the quantity of the metal or recoverable metal sold;
  • The monthly average Metal bulletin cash price per metric ton multiplied by the quantity of the metal or recoverable metal sold to the extent that the metal price is not quoted on the London Metal Exchange; and
  • The monthly average of any other exchange market approved by the Commissioner General Cash price per metric ton multiplied by the quantity of the metal or recoverable metal sold to the extent that the metal price is not quoted on the London Metal Exchange or Metal Bulletin.

Note: The Kwacha / US dollar exchange rate used to convert the US dollar norm value into Kwacha norm value is the monthly Bank of Zambia Mid-rate.

For Purposes of calculating the norm value, the metal price and monthly Bank of Zambia mid-rate can be obtained from the Large and Specialised Taxpayer office or the nearest Direct Taxes Office.

The mineral royalty rates effective 1^st January 2019 are as follows:

The following is the five tier regime for copper based on norm value:

Every holder of large-scale mining license, small-scale mining license, gemstone license, or artisan mining right is required to submit a monthly mineral royalty return within fourteen days after the end of the month in which the sale of the minerals is done.

Where the mining license holder has not produced any minerals they are still required to submit a nil return, failure to which estimated assessments will be issued

Failure to submit or late submission of the monthly mineral royalty return attracts penalties as follows:

(a) In the case of an individual – one thousand penalty units (or K300.00) per month or part thereof;

(b) In the case of a company – two thousand penalty units (or K600.00) per month or part thereof.

Mineral Royalty is due and payable within fourteen days after the end of the month in which the sale of minerals is done.

Yes, late return submission and late payments will attract penalties and interest.

Mineral Royalty payable or paid is deductible when computing company income tax when arriving at the gains and profits of a person carrying on mining operations.