The Zambia Canada DTA

Signed on:                                 16th February 1984

Came into force on:             28th DEcember 1989

Effective in Zambia on:      1st April 1989

Effective in Canada on:      1st January 1989

Definitions:

  1. Source Country means the country where income is being derived
  2. Residence Country means the country where the person who is deriving income is resident
  3. Permanent Establishment means a fixed place of business which gives rise to income tax liability

Summary of the terms of the treaty:

Class of Income Taxation and profit determination rules
1. Immovable property
  • Source country may tax
2. Business Profits
  • Source country may tax if permanent establishment exists, to the extent that the income is attributable to the permanent establishment
  • For taxation purposes, transactions between a permanent establishment and the parent establishment shall be priced at arm’s length
  • Royalties, Management consultancy fees, other fees from head office not deductible
  • Bank interest may be deducted
3. Shipping and Air Transport
  • Country of effective management may tax, if profits are associated with international traffic
  • Source country may tax if profit is associated with operations within source country
4. Associated or Related Businesses
  • Open market prices must be used for determination of profits
  • Transfer pricing adjustments may be made should where necessary
5. Dividends
  • Residence country may tax
  • Source Country tax up to 15% of dividend amount
6. Interest
  • Residence country may tax
  • Source Country may tax up 15%
  • Source country may tax if interest is associated with the permanent establishment in the source country
7. Royalties
  • Residence country may tax
  • Source Country may tax up 15%
  • Exempt if recipient is government
  • Source country may tax if royalties are associated with the permanent establishment in the source country
8. Gains from the Alienation of Property
  • Source country may tax if shares derive their value from immovable property that is situated in the source country
9. Independent Personal Services
  • Source Country may tax if:
    • Fixed base regularly available to a person is available in the source country
    • The person is available in the source country for 183 or more days in Source Country in a tax year.
    • The persons earnings from the residents of the source country exceed 10,000 Canadian Dollars or Zambia Kwacha equivalence in one tax year, regardless of whether the person has been in the source Country for less than 183 days.
Dependent Personal Services
  • Source Country may tax if employment is exercised in Source Country if:
    • Person is in country for a period up to 183 days or more in the Source Country
    • If the remuneration is paid by a resident of the source country or a permanent establishment in the source country
    • Country of effective management of enterprise may tax if remuneration is for employment exercised on international transport vessels.
11. Directors Fees
  • Residence Country may tax
12. Entertainers and Sports Persons Source Country may tax, except where income accrued to a person other than the entertainer or sports person and the entertainer or sports person did not participate directly or indirectly in the profits of
13. Pensions and annuities
  • Source Country may tax
  • In the case of periodic pension payments and annuities, tax shall not exceed 15%
14. Government Services
  • Source Country may tax
15. Students, Apprentices and Business Trainees
  • Exempt on source country
16. Other Income
  • Resident country may tax