Withholding Tax

Withholding Tax is a means by which certain taxes are collected. This is a method where a person making a payment is required to withhold the tax component of the payment and remit it to the tax authority as opposed to allowing the person who is liable to pay the tax receive the income and then pay it to the tax authority. This method is applied in situations where:

  1. Several small payments are made to many recipients, and asking recipients to register for income tax and file returns would not be cost effective. An example of this is the case of bank interest.
  2. The recipient of the income is a non-resident and thus is not registered for taxes in a country,
  3. There is a high risk of none compliance in the part of the recipient.

currently there are the tax withholding is applied on the following payment types in Zambia.

  1. Payment of dividends
  2. Payments to non-resident contractors
  3. Payment of interest on debt
  4. Payment of royalties
  5. Payment of rent
  6. Payment of management consultancy fees
  7. Payment of public entertainment fees
  8. Payment of commissions

Persons that make the payments listed above are required to registered for Withholding and file returns and make payments of withholding tax by the 14th day of the month following the month in which the payment was made.

Payments of emoluments by employers and VAT by Withholding VAT Agents are other types of payments where the Withholding tax method is applied. These are accounted for on separate returns that are provided for them.