Income Tax

Income Tax is tax imposed on a person’s income that has been earned from a source in Zambia, or by a Zambian resident who earns interest or dividend income sourced from any part of the world. This includes income of individual as well as the income of a legal entity.

Zambia has adopted the schedular system of income taxation, as opposed to the global system. In the schedular system different categories of income are identified and different taxes and tax procedures are applied on them. Theoretically, in a global system, a single tax is imposed on all income regardless of its nature. The categories of income that are identified by the Zambian income tax system include. Below are the different income tax categories and the taxes/procedures that are applied on them.

Income Category Applicable Taxes and Calculation Procedure
1 Gains or profits from business Tax rates are applied on the difference between gross turnover and the sum of:

1.       Cost of Sales
2.       Operating Expense
3.       Administrative Expense
4.       Financing Expense
5.       Capital Allowance (depreciation); and
6.       Brought forward loss

2 Emoluments Taxed according to PAYE marginal tax rates. Separate returns are filed for this.
3 Annuities  TBA
4 Dividends Subjected to Withholding Tax as a final tax at %
5 Interest, charges and discounts Subjected to Withholding Tax at %
6 Royalties, premiums or any like consideration for the use or occupation of any property Subjected to Withholding Tax at %
7 Income from the letting of property Subjected to Withholding Tax at %
8 Maintenance or allowance under any judicial order or decree in connection with matrimonial proceedings, or, under a written separation agreement TBA
9 The right to have improvements effected on the land or to the buildings by any other person TBA
10 Amount received in connection with the taking up of employment or by reason of the cessation of any agreement for employment including compensation for loss of office or employment Taxed according to PAYE marginal tax rates
11 Lump sum payments Taxed according to PAYE marginal tax rates
12 Capital recoveries TBA
13 The market value of exotic timber on a piece of land at the time of disposing it off TBA
14 Net gain in value of farm stock
15 Share Options
16 Sale of land transfer of land Property transfer tax and
17 Sale of shares in a company Property transfer tax
18 Sale of mining rights or interests in mining rights Property transfer tax

The accounting period for Income Tax is a calendar year. However, taxpayers are required to make estimate of their expected income for the year at the beginning of the year and advise the tax office by way of filing a provisional return. On the basis of the provisional return, the taxpayers must make quarterly provisional tax payments. The final return is filed at the end of the accounting period to declare the actual tax. If provisional payments exceed the actual tax payable for the accounting period, the taxpayer may claim a refund. If they are less, then the taxpayer pays the difference.

The due dates for filing the provisional returns are:

  1. 5th March for manual returns; and
  2. 31st March for online returns.
  3. 90 days from the effective date of registration if the taxpayer registered after the 321st of March.

The due dates for the quarterly payments are:

Quarter Due Date
1 First quarter 31st March
2 Second quarter 30 June
3 Third quarter 30 September
4 Fourth quarter 31st December

The due date for the payment of the balance of Income Tax is 21st June of the year following the accounting period.

If the due date falls on a Sunday of a public holiday, the due date is the next working day.

The current income tax rates are:

Category Tax Rate
1 Mineral processing 30%
2 Mining 30%
3 Manufacturing & other companies 35%
4 Public Benefit Organization (on income from business) 15%
5 Agro-processing 10%
6 Farming 10%
7 Nontraditional exports 15%
8 Chemical manufacture of fertilizer 15%
9 Organic Manufacture of fertilizer 15%
10 Trusts, deceased or bankrupt estates 35%
11 Rural enterprises Tax chargeable reduced by 1/7 for 5 years
12 Business enterprise operating in a priority sector declared under the Zambia Development Agency Act, 2006 (For ZDA license holders obtained prior to 11th October 2013) 0% for the first 5 years
Rate reduced by 50% from

6-8 years

Rate reduced by 25% from

9-10 years

13 Manufacturing enterprise located in a rural area, Multi Facility Economic Zone or industrial park 0 % for the first 5 years from commencement of operations.
14 Electronic communication business First K250, 000 35%
Above K250, 000 40%