The Zambia Government has published the Tax Amendment Act 2020 heeding the decree of the National Budget 2020.
The amendments include:
Corporate Income Tax:
- “Farming” in Section 2 of the Income Tax Act (ITA) was amended and redefined as “the cultivation of crops and plants, raising of livestock or poultry, beekeeping and rearing fish but excludes the letting of any property or provision of service ancillary to farming”. The enterprise that qualifies the definition will have a reduced tax rate of 10%. Previously it was defined as “agricultural activity” which was wrongly interpreted and included marketing, technical and management services.
- Section 78(1) of the ITA was amended to implement charging penalties and interest on overdue payments relating to withholding tax under Sections 81, 81A, 82 which were previously excluded from the Penalty and Interest regime.
- An exemption from withholding tax on interest payments made to the banks and non-banking institutions is provided under Section 82A (1) (b) of ITA.
- Section 97A of the ITA now includes definitions for actual conditions, arm’s length conditions, equity holder, fixed-rate performance shares, loan creditor, normal commercial loan, ordinary share, reference price, related or associated persons, relative, security and subsidiary.
- Explanations on eligibility regarding tax credit or adjustments in relation to transactions with both residents and non-residents are provided by amending Section 97A (11) of the ITA.
Property Transfer Tax (PTT)
- The word “share” has been redefined to include stock, certificate. Warrant or equivalent rights by amending Section 2 of PTT. PTT now includes the provisions for the transfer of rights that are equivalent to shares.
- Section 5 (2A) of PTT was amended to address the matters relating to indirect share transfers. Nominal value and actual consideration methods have been introduced to determine realized value. The amendment allows for determining nil value for a transfer with realized value made for group re-organization provided there is no sound changes to the shareholding of the companies.
Value-Added Tax (VAT):
- The amendment to VAT introduces new items to the list of zero-rated items that include the supply of equipment and machinery for the mining industry, some equipment and machinery for the mining sector, LPG and the appliances that function using gas fuel.
- Input VAT on consumables, except if they are stock has been removed and the claim of VAT on electricity supply has been limited to 80%. Both of which expects to make a raise in domestic revenue.
- Section 2 of the VAT Act was amended to bring definitions to electronic commerce, electronic service, and electronic payment.
- The uses of Electronic Fiscal Devices (EFDs) for all types of taxes have been made mandatory by the introduction of Section 7A to the VAT Act.
- To impose a tax on electronic services provided in Zambia, Section 8A was introduced regardless of the provider of the service has a place of business in Zambia or not.
Customs and Exercise Duty:
- Customs duty on certain capital equipment and machinery for the mining industry has been raised to 10% through the amendment of Section 72 of Customs and Exercise Act. The amendment also removed the customs duty on LPG to reduce its cost and to promote its use.
The amendments aim at encouraging the use of alternative energy sources and generating and improving revenue.
