Zambia Individual Tax Guide

Worldwide Personal Tax and Immigration Guide 2020–21

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Zambia ey.com/globaltaxguides

Lusaka EY Mail address: P.O. Box 35483 Lusaka 10101 Zambia

GMT +2 Street address: EY Place Plot No. 354437 Alick Nkhata Road Lusaka Zambia

Executive and immigration contacts Sam Kabanga

Patrick Z. Mawire

+260 (211) 378-312 Fax: +260 (211) 378-302 Email: sam.kabanga@zm.ey.com +260 (211) 378-308 Fax: +260 (211) 378-302 Email: patrick.mawire@zm.ey.com

A. Income tax Who is liable. Residents are subject to income tax on income

derived, or deemed to be derived, from a source in Zambia.

A person who lives and works in Zambia for more than 183 days in a tax year is considered resident for tax purposes.

Income subject to tax

Employment income. All salaries paid and benefits given in consideration for work performed in Zambia, regardless of where paid, are subject to tax in Zambia. Employers are subject to tax on certain benefits they provide, including accommodation and the personal use of a company vehicle.

Self-employment and business income. Any individual who earns income from a source or a deemed source in Zambia is subject to tax for the year in which the income is earned. Partners are subject to tax individually on their respective shares of partnership income.

Business income for tax purposes includes all profits and gains, except capital gains, arising from a business.

A 20% withholding tax is imposed on dividends and management and consulting fees paid to nonresidents, as well as on payments to nonresident contractors.

Resident individuals are subject to withholding tax on management and consultancy fees at a rate of 15%.

Directors’ fees. Directors’ fees received from resident companies are included in taxable income.

Investment income. Resident individual shareholders are subject to withholding tax on dividends at a rate of 15%. This is a final tax.

The withholding tax rate is 0% for interest earned by resident and nonresident individuals on deposit accounts in financial institutions including building societies.

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Nonresidents are subject to withholding tax at a rate of 20% on royalties.

Capital gains. Capital gains tax is not levied in Zambia. However,

before property may be transferred, Property Transfer Tax (PTT) is levied at a rate of 5%, on the realizable value of property. For purposes of PTT, property consists of land in Zambia, which includes buildings, structures and other improvements, and shares issued by companies incorporated in Zambia. PTT at a rate of 10% is imposed on the sale or transfer of mining rights or interests in such rights. Also, PTT at a rate of 5% is imposed on the sale or transfer of shares in a company incorporated outside Zambia that owns directly or indirectly 10% of the shares in a Zambian-incorporated company. PTT is also imposed at a rate of 5% on the transfer of intellectual property, which includes patents, trademarks, copyrights and industrial designs.

Deductions

Personal exemption. Individuals are exempt from tax on the first ZMW39,600 of their annual income.

Business deductions. Expenses (except for capital expenses) incurred in earning taxable income are deductible.

Rates. The following income tax rates apply to individuals.

Taxable income Exceeding Not exceeding ZMW ZMW

0 39,600 49,200 74,400

39,600 49,200 74,400 —

Rate %

0 25 30 37.5

Adjustments to the above brackets have been proposed but not yet been passed.

Relief for losses. Losses may be carried forward for up to five

years and deducted from income from a similar source.

B. Estate and gift taxes Zambia does not impose estate or gift tax.

C. Social security All employees must contribute 5% of their gross salary to the National Pensions Scheme Authority. Employers must match the employee contributions.

D. Tax filing and payment procedures The tax year-end is 31 December. Individual returns must be filed by 21 June following the tax year-end.

Employers must withhold taxes from remuneration under the Pay-As-You-Earn (PAYE) system and remit the taxes monthly to the Zambia Revenue Authority (ZRA) by the 10th day of each month. Because the responsibility to withhold taxes lies with the employer, individuals are only required to submit returns if they have other sources of income aside from employment income.

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Individuals with business or self-employment income must pay estimated taxes in quarterly installments by the following dates: • First quarter: 10 April • Second quarter: 10 July • Third quarter: 10 October • Fourth quarter: 10 January Penalties are imposed for late filing and late payment of taxes.

E. Tax treaties Zambia has entered into double tax treaties with the following jurisdictions.

Belgium Canada China Mainland Denmark Finland France Germany India

Ireland Italy Japan Kenya Mauritius* Netherlands Norway

Romania South Africa Sweden Switzerland Tanzania Uganda United Kingdom

*The Zambia-Mauritius tax treaty will be terminating on 31 December 2020.

F. Temporary visas Foreign nationals must possess visas to enter Zambia unless they are nationals of certain British Commonwealth countries or countries with which Zambia has signed visa-waiver agreements.

Although certain categories of visitors are automatically granted entry visas at ports of entry, others must obtain visas prior to their arrival in Zambia. Transit, tourist/business, re-entry and other shortterm visas are available for foreign nationals visiting Zambia.

Transit visas are granted to foreign nationals wishing to travel through Zambia en route to destinations outside the country. To obtain transit visas, foreign nationals must prove that they will be admitted to their destination outside the country and must be in possession of tickets to such destination. A transit visa is valid for a maximum period of seven days.

Tourist and business visas are issued to foreign nationals intending to visit Zambia for recreational purposes or to do business in the country without taking up employment. A tourist visa is valid for a cumulative total of 90 days in a 12-month calendar period.

A business visa is valid for a cumulative total of 30 days in a 12-month rolling period. Foreign nationals who exhaust these validity periods and who still have unfinished business in Zambia may obtain temporary permits for a prescribed fee.

Entry visas may be single or multiple entry. Visitors wishing to leave Zambia and then return must obtain re-entry visas.

Visas generally are issued upon payment of a certain specified fee. Details of fees and a list of countries whose citizens are subject to these fees are available at Zambian diplomatic missions.

Zambia does not grant permanent visitor permits or permanent work permits.

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G. Work and investors’ permits Work permits. Foreign nationals must possess work permits to

engage in paid employment with a Zambian employer. Zambia does not have quotas limiting the number of foreign nationals who may be engaged by employers.

According to the Zambia Department of Immigration, the permit is issued to foreigners who enter the country to take up employment for a period exceeding 6 months and can be extended for a further period or periods to a maximum of 10 years from the date of its issuance. All applicants should remain outside Zambia until the permit is approved.

Requirements for issuance. The following are the requirements for issuance: • Cover letter from the employer addressed to the Director General of Immigration • Employment contract or letter of offer • Police clearance from country of residence • Curriculum vitae • Registration certificate from the relevant professional body in Zambia (if required) • Certified copy of qualifications (academic and professional) • Copy of marriage and birth certificates (if available) • Certified copy of valid passport particulars (bio data and last endorsement stamp for Zambia) • Certified certificate of share capital and list of directors • Two recent passport-size photographs • Prescribed fee Requirements for renewal or extension. The following are the requirements for the renewal or extension of a work permit: • Cover letter to the Director General of Immigration from the concerned employer • Extended contract • Original permit • Prescribed fee • Certified copy of valid passport • Requirements for variation for addition of children and/or spouse • Cover letter to the Director General of Immigration from the applicant • Certified copies of marriage and birth certificates (as appropriate) • Certified copy of valid passport (bio data and last endorsement stamp for Zambia) • Two recent passport-size photographs • Prescribed fee Requirements for variation by change of occupation. The following are the requirements for variation by change of occupation: • Cover letter to the Director General of Immigration from the “employer” or “concerned employer” (in this context, “employer” means a person with whom an employee has an employment contract, while “concerned employer” means a person to whom another person reports who has binding obligations to the other person even though there is no direct employment contract and who has the authority to give directives to the other person [the other person may be an independent contractor])

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• Letter of appointment for new occupation • Original permit • Certified copies of professional certificates • Prescribed fee Requirements for variation by change of employer. The following are the requirements for variation by change of employer: • Cover letter to the Director General of Immigration from the concerned employer • Letter of appointment or offer or contract • Original permit • Letter of release from previous employer • Prescribed fee The application for a work permit is processed and issued while the applicant is outside Zambia. All applicants must submit online applications and pay prescribed fees before consideration by the Zambia authorities.

As a result of the varying levels of investment, size and mechanization of different companies, as well as the varying periods required for the transfer of certain skills, especially of a technical nature, the validity period of employment permits is determined on a case-by-case basis.

Holders of work permits do not need to obtain separate residence permits.

Investors’ permits. An investor’s permit is issued to a foreigner

intending to establish a business or invest in Zambia or who has established or invested in a business in Zambia. The permit allows the holder and his/her spouse and minor children to enter, re-enter and remain in Zambia until it expires. These permits may be obtained through the submission of the following documents listed below to the Director General of Immigration: Requirements for issuance. The following are the requirements for issuance of investors’ permits: • Cover letter addressed to the Director General of Immigration.

• Certificate of incorporation.

• Certificate of share capital (if required).

• Certificate of minimum capital.

• Investment license from Zambia Development Agency (ZDA) (not mandatory).

• List of directors.

• Proof of personal investment (bank statement, money transfer, ZRA Form CE20 and bill of lading from ZRA). If an investor is forming his or her own company, he or she should bring in at least USD250,000. If he or she is joining an existing company, it should be at least USD150,000.

• Proof of ownership or lease agreement in Zambia.

• Certified copy of valid passport (bio data and last endorsement stamp for Zambia).

• Two recent passport-size photographs.

• Prescribed fee.

Requirements for renewal or extension. The following are the requirements for the renewal or extension of investors’ permits: • Cover letter to the Director General of Immigration • Original permit

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• Inspection report by the Zambia Department of Immigration • Value-added tax (VAT)/ZRA receipts • Audit report from a recognized firm registered with the Zambia Institute of Chartered Accountants (ZICA) • Lease agreement (if applicable) • Current bank statement • Certified copy of passport • Prescribed fee Requirements for variation by inclusion of another company. The following are the requirements for variation by inclusion of another company: • Cover letter addressed to the Director General of Immigration • Certificate of incorporation • Certificate of share capital • Certificate of minimum capital • Investment license from ZDA (not mandatory) • List of directors • Proof of personal investment (bank statement, money transfer, ZRA Form CE20 and bill of lading from ZRA) • Proof of ownership or lease agreement in Zambia • Certified copy of valid passport (bio data and last endorsement stamp for Zambia) • Original permit • Prescribed fee Requirements for variation by change of nature of business or addition of nature of business. The following are the requirements for variation by change of nature of business or addition of nature of business: • Cover letter to the Director General of Immigration • Original permit • Certified copies of certificate of incorporation • Appropriate license • List of directors • List of share capital • Certificate of registration of business name (if applicable) • Investment license (if any) • Proof of ownership of land or lease agreement (if applicable) • Prescribed fee Requirements for variation by addition of children and/or spouse. The following are the requirements for variation by addition of children and/or spouse: • Cover letter to the Director General of Immigration from the applicant • Original permit • Certified copies of marriage or birth certificates (as appropriate) • Certified copy of valid passport (bio data and last endorsement stamp for Zambia) • Two recent passport-size photographs • Prescribed fee

H. Residence permits The residence permit confers permanent residence to the holder and is issued to the following: • Persons who have been ordinarily and lawfully residents in Zambia

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• Children of residence permit holders and Zambians • Holders of employment or investor’s permits for at least 10 and 3 years, respectively • Holders of spouse permits for at least five years • Retirees Applicants aged between 7 and 15 years. The following are the

requirements for applicants aged between 7 and 15 years: • Cover letter to Director General of Immigration • Certified photocopy of the applicant’s valid passport • Certified copy of birth certificate of the applicant • Certified copy of parents’ status • Original permit (if applicable) • Two recent passport-size photographs • Adoption certificate (in the case of adopted children) • Proof of enrollment at an educational institution (for students) • Payment of prescribed fee

Applicants 16 years and above. The following are the require-

ments for applicants 16 years and above: • Cover letter to the Director General of Immigration • Aliens Registration Card • Certified copy of birth certificate of the applicant • Certified copy of marriage certificate • Two testimonials as to the character from persons of good standing who have known the applicant for a minimum period of not less than three years • Certified photocopy of the applicant’s valid passport • Certified copy of host’s status • Two recent passport-size photographs • Surrender of original permit (if applicable) • Adoption certificate (in the case of adopted children) • Proof of enrollment at an educational institution (for students) • Payment of prescribed fee Holders of investor’s permit. The following are the requirements

for holders of an investor’s permit: • Cover letter to the Director General of Immigration • Aliens Registration Card • Original permit • VAT/ZRA receipts • Current bank statement • Audited financial report from a ZICA-recognized firm • Title of ownership or lease agreement (if applicable) • Certified photocopies of current passport (bio data and last endorsement stamp for Zambia) • Two recent passport-size photographs • Inspection report by the Zambia Department of Immigration • Payment of prescribed fee Holders of employment permit (including government). The fol-

lowing are the requirements for holders of an employment permit (including government): • Cover letter to the Director General of Immigration • Certified copy of Aliens Registration Card • Original permit • Two reference letters • Certified photocopies of current passport • Two recent passport-size photographs

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• Contract of employment • Certified documentary proof of professional or other qualifications • Payment of prescribed fee Long-term entry permits (residence permits) issued for periods exceeding three years are available for certain categories of persons, including foreign investors holding investors’ permits (see Section G). A long-term entry permit allows the holder to remain in Zambia indefinitely, as long as the holder continues to meet the conditions specified by the permit.

Foreign nationals who hold long-term entry permits may apply for Zambian citizenship after residence in Zambia for 10 years.

I. Family and personal considerations Family members. The spouses of holders of work, self-employment

and entry permits, as well as their children under 18 years of age, enjoy the same status as the principal permit holders. They do not need to apply for separate visas.

Marital property regime. Zambia does not have a community

property or similar marital property regime and does not enforce community property claims brought between couples who establish a marital domicile in Zambia.

Forced heirship. Zambia applies a type of forced heirship rule at

the discretion of the court if the deceased does not provide adequately for his or her surviving spouse, parent or child or dies intestate.

Driver’s permits. Foreign nationals may drive legally with their

home country driver’s licenses for the first 90 days after their arrival in Zambia. On expiration of the 90-day period, they must apply for a Zambian driver’s license. To obtain a Zambian driver’s license, the applicant must take a driving test.