ZambiaTax Obligations Detailed

As of today, February 5, 2025, here's a summary of employer tax obligations in Zambia: Employers in Zambia have various tax responsibilities, including Pay-As-You-Earn (PAYE), Skills Development Levy (SDL), and contributions to the National Pension Scheme Authority (NAPSA).

Pay-As-You-Earn (PAYE)

PAYE is deducted monthly from employee salaries based on progressive tax bands ranging from 0% to 37.5%. The deducted tax must be remitted to the Zambia Revenue Authority (ZRA) by the 10th of the following month. Specific rates for 2025 are not available in the provided sources.

Skills Development Levy (SDL)

Employers pay SDL at a rate of 0.5% of the gross emoluments paid to employees. This levy is also due by the 10th of the following month.

National Pension Scheme Authority (NAPSA)

Both employers and employees contribute to NAPSA. The employer's contribution is currently capped at 5% of the employee's basic salary or a maximum of approximately ZMW 1,221.8 per month as per the figures from 2022. The employee also contributes 5% of their salary.

Provisional Income Tax

Companies are required to pay provisional income tax in four installments throughout the tax year:

• 1st Installment: Due March 31st, payable by April 10th.
• 2nd Installment: Due June 30th, payable by July 10th.
• 3rd Installment: Due September 30th, payable by October 10th.
• 4th Installment: Due December 31st, payable by January 10th.

The tax year in Zambia runs from April 1st to March 31st. Annual income tax returns are typically due by June 21st of the following tax year. For manually submitted returns, the deadline is June 5th.

Value Added Tax (VAT)

Businesses with a taxable turnover exceeding K800,000 per year must register for VAT. The standard VAT rate is 16%. Certain goods and services are zero-rated or exempt.

It is advisable to consult the ZRA website and a qualified tax advisor for the most recent updates and specific details related to your business situation as tax laws and regulations can change.

In Zambia, employee tax deductions primarily revolve around the Pay As You Earn (PAYE) system, which encompasses various mandatory deductions.

PAYE (Pay As You Earn)

PAYE is the core tax deduction system for employees in Zambia. Employers calculate, deduct, and remit the tax to the Zambia Revenue Authority (ZRA). Emoluments subject to PAYE include:

• Salaries and wages
• Overtime pay
• Bonuses and profit sharing
• Fees, commissions, and allowances
• Leave pay
• Cash benefits (excluding specific exemptions like subsistence allowances)

The PAYE system uses progressive tax bands and rates, applied to the employee's total emoluments. While the specific tax bands and rates for 2025 are yet to be officially released, they are anticipated to be announced during the 2025 budget. Tax is calculated based on these bands, and the net pay disbursed to the employee is the gross pay less the calculated PAYE tax.

Other Deductions

Beyond PAYE, several other deductions may apply:

• NAPSA Contributions: Both employers and employees contribute 5% of the employee's earnings to the National Pension Scheme Authority (NAPSA), the public pension system.

• Other Statutory Deductions: While details are limited, the sources indicate other statutory deductions might exist. Further investigation may be necessary to ascertain these specific deductions.

Deductions Not Allowed

Certain expenses are specifically not deductible for employees under Zambian tax law:

• Alimony payments
• Mortgage interest expenses
• Zambian taxes paid on employment income

It's important to note that while business expenses are generally deductible for businesses, this test is difficult to meet for employee-incurred expenses.

Important Considerations for Employers

Employers have several key responsibilities regarding employee tax deductions:

• Accurate Calculation and Deduction: Employers must correctly calculate and deduct PAYE and other statutory deductions from each employee's emoluments.

• Timely Remittance: Deducted taxes must be remitted to ZRA promptly to comply with legal obligations.

• Annual PAYE Returns: Employers are required to submit annual PAYE returns to ZRA on the prescribed form at the end of each tax year.

Additional Information

Charitable contributions to organizations approved or owned by the Zambian government are deductible up to 15% of the taxable income.

When employing a person with a disability, a fixed deduction of ZMW 2,000 can be claimed.

This information is based on the latest available data as of February 5, 2025, and might be subject to changes based on updated regulations or official announcements. It's essential to verify the latest guidelines from the ZRA for the most current information.

In Zambia, the Value Added Tax (VAT) is a consumption tax levied on most goods and services.

VAT Rates

• Standard Rate: 16% This rate applies to most goods and services.
• Zero Rate: 0% This applies to specific goods and services, primarily exports, and allows registered businesses to reclaim input VAT.
• Exempt Supplies: These supplies do not attract VAT and registered businesses cannot claim input VAT on related expenses. Examples include certain basic food items, healthcare services, education services and certain financial transactions.

VAT Registration

• Threshold: Businesses with an annual turnover exceeding ZMW 800,000 are required to register for VAT. A quarterly threshold of ZMW 200,000 also exists. Non-resident digital service providers are subject to the same thresholds.
• Process: Registration can be done online through the Zambia Revenue Authority (ZRA) portal. Upon registration, businesses receive a Taxpayer Identification Number (TPIN) and a VAT account number. Non-resident businesses must appoint a local tax agent.

VAT Filing and Payment

• Frequency: VAT returns and payments are due monthly.
• Deadline: The deadline for filing and payment is the 25th day of the month following the reporting period.
• Electronic Invoicing: As of 1st October 2024 the e-invoicing is required for VAT registered businesses in Zambia.

Examples of Exempt Goods and Services

As of today, February 5, 2025, some examples include:

• Basic foodstuffs (subject to change as per government announcements)
• Healthcare and medical services
• Educational services
• Certain financial and insurance services
• Mains water and sewage services
• Transportation of passengers by licensed buses, boats, trains, and airplanes
• Funeral services

This information is current as of February 5, 2025, and might be subject to change. Always refer to official ZRA publications for the latest updates.

Zambia offers a range of tax incentives to stimulate investment and economic growth. These incentives target specific sectors like agriculture, manufacturing, and mining, along with broader initiatives like those applicable to Multi-Facility Economic Zones (MFEZ). As of February 5, 2025, the following incentives are applicable, though it's crucial to consult the latest official sources as policies are subject to change.

Corporate Tax Incentives

• General Incentives:

  • Standard corporate tax rate: 35%
  • Reduced corporate tax rates for specific sectors:
    • Agriculture: 10%
    • Agro-processing: 10%
    • Non-traditional exports: Increased from 15% to 20% in the 2025 budget.
    • Mining: 30%
  • Carry forward of losses for 5 years (10 years for mining and energy sectors)

• Export Incentives:

  • Reduced corporate tax rate of 20% (increased from 15% in the 2025 budget) for non-traditional exports and value addition to copper cathodes.
  • Exemption from duty and VAT on imported machinery for non-traditional exporters.
  • Refund of Zambian VAT on export of Zambian products by non-resident businesses under the Commercial Exporters Scheme.

• Agriculture Incentives:

  • Tax exemption on dividends for the first 5 years of operation.
  • Capital expenditure allowance of 20% per annum for the first five years on farm improvements.
  • Accelerated depreciation on farm machinery.
  • Special development allowances for specific crops (tea, coffee, bananas, citrus, etc.).
  • Input VAT claim for three months prior to VAT registration.
  • Zero-rated VAT on selected agricultural equipment.

• Manufacturing Incentives:

  • Input VAT claim for two years prior to the commencement of production.
  • Reduced duty on some raw materials (from 15% to 5%).
  • Reduced duty (5-15%) on some industrial machinery.
  • Income from organic and chemical fertilizer manufacturing taxed at a reduced rate of 15%.

• Mining Incentives:

  • Carry forward of mining losses extended to 10 years.
  • 15% withholding tax on interest, rent, consultancy, royalties, and dividends.
  • 100% offsetting of losses against profits.
  • Duty-free import of capital equipment and utility vehicles.
  • 100% capital allowance.
  • Input VAT claim for five years on pre-production expenditure for exploration companies.
  • Zero-rating on exported mining products.

• Multi-Facility Economic Zones (MFEZ) and Industrial Parks Incentives:

  • No withholding tax on management fees, consultancy fees, and interest repayments to foreign contractors.
  • Zero-rated supplies to MFEZ and industrial park developers.
  • Exemption from reverse VAT on foreign supplies to MFEZ and industrial parks.
  • Exemption from customs duty on raw materials, equipment, and machinery imported for MFEZ and industrial park development.

• Priority Sector Incentives (Manufacturing, Construction, Tourism, Energy & Water Development):

  • 0% import duty on capital equipment and machinery for five years.
  • Accelerated depreciation on capital equipment and machinery (50-100%).

Personal Income Tax

• Progressive tax rates ranging from 25% to 35%.
• No withholding tax on interest earned on savings and deposit accounts.

Value Added Tax (VAT)

• Standard VAT rate: 16%.
• Input VAT claim available for registered businesses.

Withholding Tax

• 15% on rental income, consultancy fees, dividends, and royalties for non-residents.
• Exemption certificates available for royalties

Tax Administration

The Zambia Revenue Authority (ZRA) administers taxes in Zambia.

Other Tax Changes (2025 Budget):

• Introduction of a 15% Advance Income Tax (AIT) on remittances exceeding USD 2,000 or equivalent for entities without valid Tax Clearance Certificates or non-compliant exporters.
• Revision of presumptive tax bands for public service vehicle operators.
• Implementation of the Smart Invoice System for VAT-registered entities.

This overview provides a summary of the tax incentives available in Zambia as of February 5, 2025. Remember to refer to official ZRA publications and consult with tax professionals for the most current and specific details relevant to your circumstances. Tax laws are subject to change, and staying updated is crucial for accurate compliance.