zambia national budget 2021

ZAMBIA NATIONAL BUDGET 2021

BDO ZAMBIA - Budget 2021 BDO ZAMBIA - Budget 2021

1.0 BUDGET OVERVIEW 1

2.0 BUDGET HIGHLIGHTS FOR 2021 4

3.0 DIRECT TAXES 5

4.0 VALUE ADDED TAX 7

50. PROPERTY TRANSFER TAX 8

6.0 TOURISM 9

7.0 CUSTOMS AND EXCISE 10

8.0 TRANSFER PRICING 12

9.0 NON-TAX MEASURES 12

10.0 DOUBLE TAXATION TREATIES 13

11.0 ABOUT US 14

TABLE OF CONTENTS


The September 2020 Zambia Budget Address for the year 1 January 2021 to 31

December 2021 was delivered to the National Assembly on Friday 25 September, 2020 by the Honourable Dr. Bwalya K.E. Ng’andu, MP, Minister of Finance.

The Minister presented a K119 billion budget with the theme “Stimulating Economic Recovery and Building Resilience to Safeguard Livelihoods and Protect the Vulnerable”. At a glance, the 2021 budget appears to largely be a continuation of the 2020 budget agenda with a central purpose of stimulating economic growth. The uniformity between the two budgets can even be inferred from the similarity in the themes, as last year’s budget theme was “Focusing national priorities towards stimulating the domestic economy”. It is clear that the Minister’s central objective remains stimulating growth in the Zambian economy and to this end, he unveiled a medium-term Economic Recovery Program (“ERP”), which is the successor to the Economic Stabilization and Growth Program (“ESGP”) which ended in 2019.

The ERP aims to bolster economic growth and restore debt sustainability and appears

to favour predictability in policy formulation owing to the lack of drastic tax policy measures and proposals, as has been the case in budgets in the recent past. The central macro-economic objectives of the 2021 budget outlined by the Minister are as follows:a) Achieve a real GDP growth rate of 1.8%, as opposed to 3% proposed in last year’s budget;b) Reduce the inflation rate towards the 6% -

8% range, maintaining the target proposed in last year’s budget;c) Reduce the fiscal deficit to 9.3% as opposed to 5.5% set in last year’s budget; andd) Achieve domestic revenue collection of not less than 18% of GDP as opposed to 22% proposed in last year’s budget.

As a backdrop to the 2021 budget, the Minister revealed that real GDP growth is projected at negative 4.2% in 2020, representing the first recession in the country since 1998. Overall, all sectors of the Zambian economy are expected to record negative growth due to passive economic activity as a result of COVID-19 suppression measures as well as country-wide electricity rations. The Minister however expects the telecommunications and agricultural sectors to register positive growth. Continued depreciation of the Kwacha may potentially curtail the anticipated growth.

1.0 BUDGET OVERVIEW

“ Stimulating economic recovery & building resilience...

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“

The Minister also notes that the external public debt stock in 2019 increased to USD 11.97 billion, representing a 4.3% increase from 2019. He notes that Government, with the help of various legal and financial advisors, is in the process of developing a liability management strategy aimed at achieving debt sustainability.

The Zambian Kwacha depreciated against the US Dollar to K19.95 as at 22 September 2020, representing a 41.9% drop from comparatives as at end of December 2019. Furthermore, inflation exceeded the medium-term target of 6% - 8% to hit 15.5% as at end of August 2020.

Imports of goods by Zambians declined by 30% to USD 2.3 billion from USD 3.3 billion in 2019. Similarly, export earnings declined by 15.5% from USD 3.8 billion to 3.2 USD billion. A decline in economic activity as result of COVID-19 suppression measures as well as the deprecation of the Kwacha significantly contributed to the drop in imports and export earnings. Copper earnings in particular declined by 14.8%, however, copper export volumes increased by 16.5% to 449,000 metric tones.

In the 2021 budget, debt servicing constitutes the largest expenditure, representing around 40% of the total budget and further adding pressure on the fiscus. The table on the following page outlines the expenditure by functions of Government proposed in the 2021 budget and provides a 2020 comparative.

Some of the notable achievements included in this budget are the amendment of the Republican Constitution; expansion in our health and education facilities; enhanced interconnectivity of our country through improved road infrastructure; and the provision of social safety nets for the vulnerable.

...to safeguard livelihoods and protect the vulnerable

Inflation exceeded the medium-term

target of 6% - 8% to hit 15.5%

2


Debt servicing constitutes 40% of the total budget“

1.0 BUDGET OVERVIEW

Function 2021

Share of

budget 2020

Share of

budget General Public Services 57,819,227,707 48.3% K44,080,742,270 41.6%

Domestic Debt Interest 18,338,481,000 12,634,848,146 External Debt Interest 27,745,178,541 21,090,794,856 Dismantling of Arrears 2,762,080,579 2,278,733,732 Local Government Equalization Fund 1,164,567,612 1,164,567,612 General Elections and Voter Registration 598,112,678 135,000,000 Constituency Development Fund 249,600,000 249,600,000 MP's Gratuity 202,073,000 Public Affairs and Summit Meetings 200,000,000 143,726,597 Contingency 125,000,000 100,636,628 Compensation Fund 100,000,000 100,000,000 Sinking fund - 636,000,000

Defence 5,642,820,724 4.7% 6,526,391,423 6.2% Public Order and Safety 3,078,694,172 2.6% 4,042,702,155 3.8% Economic Affairs 21,499,987,741 18% 21,833,351,543 20.6%

• Road infrastructure 6,214,145,268 10,552,606,147 • Farmer Input Support Programme 5,701,404,933 1,111,840,201 • International Airports 567,334,377 1,823,481,818 • Strategic Food Reserves 517,500,000 660,000,000 • Rural Electrification Fund 307,199,557 166,339,781 • Empowerment Funds 266,285,212 - • O/w You Empowerment Funds 155,237,025 - • Energy/Power Infrastructure 11,167,970,334

Environment Protection 955,530,142 0.8% 611,777,853 0.6% Housing and Community Amenities 2,221,524,168 1.9% 3,460,376,555 3.3%

• Water Supply and Sanitation 2,172,274,286 2,620,137,161 • Markets, Bus Stations and Solid

Waste Management 24,441,200

Health 9,653,313,513 8.1% 9,336,591,584 • Infrastructure 1,731,846,564 1,479,947,346 • Drugs and Medical Supplies 1,392,443,990 900,622,880 • Operations for Hospitals 627,263,831 686,266,173

Recreation, Culture and Religion 151,357,265 383,045,401 Education 13,772,752,981 13,121,648,466

• Infrastructure 1,216,937,500 1,071,920,363 • Skills Development Fund 178,857,469 179,181,956

Social Protection 4,820,803,202 2,580,984,987 • Social Cash Transfer 2,344,175,162 1,047,422,180 • Public Service Pension Fund 1,067,955,725 1,020,387,712 • Food Security Pack 1,100,000,000 122,162,992

TOTAL 119,616,011,615 100% 106,007,612,236 Some of the notable achievements included in this budget are the amendment of the Republican Constitution; expansion in our health and education facilities; enhanced interconnectivity of our country through improved road infrastructure; and the provision of social safety nets for the vulnerable.

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2.0 BUDGET HIGHLIGHTS FOR 20212.1 DIRECT TAXES • PAYE threshold and bands have been increased• Development allowance in horticulture increased to 5 years from 3 years• Tax rate on betting increased to 25% from 10%• Income tax rate on hotels and lodges reduced to 15% from 35%• Introduction of new tax allowance for the use of selected local raw materials 2.2 VALUE ADDED TAX • All tractors zero rated• Full body sanitisation equipment zero rated

2.3 CUSTOMS AND EXCISE • Import duty on safari game viewing motor vehicles suspended• licences paid by tourism enterprises and hotel managers suspended• Import duties on items used to support horticulture and floriculture subsectors removed or suspended• Export duty on crocodile skin removed• Import duty on copper ores and concentrates removed• High-value second hand motor vehicles to be subjected to ad valorem import duty• Import duty increased to 40% on various agro-processed products• Excise duty on plastic flat bags introduced at 30%• Import duty on electric motor vehicles reduced to 15% from 30%

New tax allowance for use of selected local raw materials

PAYE threshold

and bands

increased

All tractors

zero rated

4

“


All of the following measures will take effect from 1st January, 2021.

3.1 PERSONAL TAX RATES

The exempt threshold for Pay-As-You-Earn has been increased to K4,000 from K3,300 per month and the bands have been adjusted as follows:

3.2 INCREASE THE INCOME TAX DEDUCTION AVAILABLE FOR EMPLOYING DIFFERENTLY ABLED PERSONSThe amount allowable for deduction by an employer for employing a differently abled person has been increased to K2,000 per annum from K1,000 per annum. This is aimed at encouraging the employment of differently abled persons.

3.3 INCREASE OF TAX CREDIT FOR DIFFERENTLY ABLED PERSONS The tax credit for differently abled persons has been increased to K500 per month from the current K250 per month.

3.4 INCREASE IN DEVELOPMENT ALLOWANCE CLAIM PERIOD The number of years for claiming the 10% development allowance in the horticulture and floriculture subsectors has been increased to 5 years from the existing 3 years. This allowance applies to persons growing rose flowers, tea, coffee, banana plants or citrus fruit trees or other similar plants or trees.

3.5 INCREASE IN INCOME TAX RATE IN THE GAMING AND BETTING INDUSTRY The tax rate on betting has been increased to 25% from 10% of gross takings.

3.0 DIRECT TAXES

THE BUDGET IN DETAIL

Income Bands Per Annum

Income Bands

Per Month

Tax Rate %

First K48,000 First K4,000 0

Next K9,600 Next K800 25

Next K25,200 Next K2,100 30

Balance over K82,800

Balance over K6,900

37.5

Development allowance in horticulture increased to 5 years from 3 years

5


Tax rate on betting increased to 25% of gross

takings

“

3.6 REDUCTION OF INCOME TAX RATES FOR HOTELS AND LODGESThe corporate income tax rate on income earned by hotels and lodges on accommodation and food services has been reduced to 15% from 35%. This is aimed at resuscitating the tourism sector and promoting local tourism following the disruptions caused to the industry by the COVID-19 pandemic.

3.7 NEW LOCAL CONTENT ALLOWANCEA local content allowance for income tax purposes at the rate of 2% will be introduced for businesses using selected local raw materials. This is aimed at encouraging the use of locally available raw materials such as mangoes, pineapples and cassava.

3.8 ZAMBIA DEVELOPMENT AGENCY TAX INCENTIVESThe investment threshold for a Zambian citizen to qualify for tax incentives under the Zambia Development Agency Act No. 11 of 2006 will be reduced to $100,000 from $500,000 for those intending to operate in a priority sector, a multi facility economic zone or industrial park.

3.8 CLARIFICATION OF THE LIMITATION RULE ON INTEREST DEDUCTIBILITYThe amendment seeks to clarify that the limitation rule on interest deductibility introduced in 2019 applies on all interest deductions of borrowings of both revenue and capital nature.

3.9 CURRENCY FOR KEEPING BOOKS OF ACCOUNTIt will be mandatory to keep books of account in Kwacha. Mining companies with at least 75% of their earnings in foreign currency from abroad or within Zambia may keep accounts in US Dollars.

3.10 INCREASE IN COMMISSIONS TO TAX AGENTSThe maximum commission payable to tax agents will be increased from 3% to 10% in order to allow agents to effectively recover costs for their operations.

3.11 INTRODUCTION OF WHT ON ROYALTY FINANCINGThe amendment introduces withholding tax on payments made under royalty financing agreements by a Zambian resident to a non-resident.

3.12 TAX APPLICABLE ON EMPLOYEE LOAN BENEFITSThe amendment provides for the interest rate to be used in determining the benefits tax payable by employers on loans advanced to employees. This will be amended from an ‘open market rate’ system to a rate of 2% above the Bank of Zambia Policy Rate.

3.13 UPDATED STATUTORY BODY MANDATES Statutory bodies to request for Taxpayer Identification Numbers and Tax Clearance Certificates before registering and renewing membership or issuing any licenses and permits.

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All of the following amendments to the VAT Act will take effect from 1st January, 2021 except where otherwise stated.

4.1 RATE OF VAT The VAT rate remains unchanged at 16%.

4.2 ZERO RATING OF TRACTORS USED IN AGRICULTURE INDUSTRY All tractors used in agriculture to be zero rated for VAT purposes.

4.3 EQUIPMENT USED IN FULL BODY SANITISATION TO BE ZERO RATEDAs a result of the COVID-19 pandemic, all equipment used for full body sanitisation will be zero-rates for a period of one year effective 26 September 2020.

4.4 TAXABLE SUPPLIER OBLIGATED TO PROVIDE AN ELECTRONIC PAYMENT MACHINETaxable suppliers are obliged to provide an electronic payment machine and failure to comply attracts a penalty.

4.5 FINE CHARGEABLE FOR EVASION OF VATThe fine chargeable for evasion of VAT has been Increased to 300,000 penalty units (K90,000) from 30,000 penalty units (K9,000).

4.6 PROVIDE CLARITY ON WHEN THE TWO-YEAR LIMITATION PERIOD IS TO COMMENCE

ZRA to provide clarity on when the two-year limitation period is to commence.

4.7 DEFINITION OF “PLACE OF SUPPLY OF GOODS”ZRA to provide clarity on the definition of “Place of supply of goods”.

4.8 ESCALATORY FINE TO BE CHARGEABLE ON FALSE RETURNS AND STATEMENTSThe applicable penalties are as follows:

OFFENCE APPLICABLE PENALTY

First occurrence Up to 60,000 penalty

units (K18,000) per period

audited.

Second

occurrence

Up to 120,000 penalty


audited.

Third occurrence Up to 240,000 penalty


audited.

Any repeat event

beyond third

occurrence

Deemed as evasion of tax

and penalty chargeable

is 300,000 penalty units

(K90,000).

Full body sanitisation equipment zero rated

“

4.0 VALUE ADDED TAX

7


Only Trusts that are Public Benefit Organisations are exempt from PTT

“

All of the following amendments to the Property Transfer Tax Act will take effect from 1st January, 2021.

5.1 REDEFINING THE REALISABLE VALUE ON INDIRECT TRANSFER OF SHARES The measure is aimed at determining the realisable value in respect of the transfer of shares issued by a company incorporated outside Zambia to ensure that only the Zambian proportion of the value is included in the value chargeable to PTT.

5.2 CLARITY ON APPROVED PUBLIC BENEFIT ORGANISATIONS EXEMPT FROM PTT This measure clarifies that only Trusts that are approved Public Benefit Organisations are exempt from PTT.

5.3 FOREIGN CURRENCY TRANSACTIONSThe amendment prescribes the exchange rate applicable to foreign currency denominated transactions for PTT purposes.

5.4 APPLICATION OF PTT TO INDIRECT FOREIGN TRANSFERS OF SHARESIn the case of indirect share transfers , this measure exempts the liability to PTT where the value of the transferred shares is less than 10% of the Zambian company value.

5.0 PROPERTY TRANSFER TAX

Exchange rate applicable to foreign currency

denominated transactions is prescribed for PTT

8


6.1 RATE OF INCOME TAX Corporate income tax rate to be reduced to 15% from 35% on income earned by hotels and lodges on accommodation and food services.

6.2 IMPORT DUTYImport duty on safari game viewing motor vehicles and tourist buses and coaches to be suspended.

6.3 SUSPENSION OF RENEWAL FEES ON LICENCESSuspension of renewal fees paid by hotels and lodges on licences.

6.4 SUSPENSION OF RETENTION FEESSuspension of retention fees paid by tourism enterprises.

6.5 SUSPENSION OF REGISTRATION FEES FOR HOTEL MANAGERSSuspension of registration fees for hotel managers.

6.6 IMPOSITION OF A PENALTY FOR UNDER DECLARATION ON TOURISM LEVY RETURNSTourism levy regulations to provide for the imposition of a penalty for under declaration on tourism levy returns.

Renewal fees for licenses suspended for hotels & lodges

“

6.0 TOURISM

Import duty on tourist game

viewing vehicles, buses & coaches

suspended

9


Excise duty on plastic flat bags introduced at 30%

“

7.0 CUSTOMS AND EXCISEAll of the following measures will take effect from 1st January, 2021.

7.1 REMOVAL/REDUCTION OF IMPORT DUTY IN THE HORTICULTURE AND FLORICULTURE SUBSECTORSIn an effort to enhance floriculture and horticulture subsectors and to promote other traditional exports, the following measures have been proposed:

• Suspension of import duty on biological control agents• Removal of import duty on greenhouse plastics• Reduction of import duty on selected bulb plants from 25% to 15%• Reduction of import duty on secateurs from 15% to 5% and on pruners from 25% to 5%• Removal of import duty on selected agricultural clippers.• Removal of import duty on crocodile skin

7.2 REMOVAL/REDUCTION OF OTHER IMPORT DUTYFurther incentives for other sectors aimed at stimulating their economic activity were proposed. These include:

• The removal of import duty on copper ores and concentrates This measure has been proposed to encourage local processing.

In January 2019, a 5% import duty was introduced on importation of copper ores and concentrates and this led to a significant rise of procurement costs for businesses operating in the mining and processing sectors.

• The import duty on importation of refrigerated trucks has been suspended. This measure is aimed at supporting the domestic and export markets• Reduction of import duty on selected trimmings from 25% to 5% This is aimed at promoting the local garments and textile industry• Reduction of import duty on electrical motor vehicles from 30% to 15% The proposed measure is aimed at reducing the use of fossil fuel

7.3 MITIGATING REDUCTIONSIn mitigating the revenue loss arising from the above measures, the following were proposed:

• Increase import duty to 40% from 25% on agro products such as beef and beef processed products, chicken and chicken processed products as well as fish imported from outside the SADC and COMESA regions• Introduce excise duty at the rate K1.50 per litre on reconstituted milk• Harmonization of import duty rate on reconstituted milk with other forms of milk at 15%

10


• Adjust the specific excise duty rate on cigarettes to K302 per mille from K265;• Introduce a surtax at the rate of 20% on Imported un-denatured ethyl alcohol of an alcoholic volume strength of 80% or higher• Introduce excise duty on plastic flat bags at the rate of 30%• Harmonize the import duty rates of cotton and polyester fabric at 15% ad valorem or K 1.82 per kilogram whichever is higher• Exclusion of high value motor vehicles from the definition of used motor vehicles and subject them to ad valorem import duty

7.4 CARBON EMISSION CERTIFICATE VALIDITY PERIOD Validity period of the carbon emission certificate has been extended from 90 days to 1 year for motor vehicles in transit or imported temporarily.

7.5. PENALTIES FOR FALSE INVOICES Extend penalties for false invoices, false representation and forgery to service providers.

7.6 PRODUCTION ALLOWANCE FOR TOBACCO PRODUCTS This will provide for a production loss allowance at 5% for tobacco products.

7.7 INTRODUCTION OF CREDIT MECHANISM FOR AIRTIME INTERMEDIARIESThe Customs and Excise Act has been

amended to provide a mechanism for an intermediary to deduct the excise duty paid on airtime and in turn charge excise duty to the end user.

7.8 ADVANCE TARIFF RULINGThe Customs and Excise Act has been amended to limit advance ruling to goods that are envisaged to be imported or exported.

7.9 ASSESSMENTS AND COLLECTION OF DUTYThe Customs and Excise Act has been amended to provide for the assessment and collection of duty in convertible currencies as prescribed by the Commissioner General.

Exclude high-value vehicles from definition of used vehicle

“

Import duty increased to 40% on agro products from outside the

SADC and COMESA regions

11


Country by County reporting requirements introduced

“

• The government proposes to increase various immigration permit fees to cost recovery levels • Discounts granted to the public on fees paid for online registration of a

private company limited by shares and the filing of annual returns made on the e-PACRA system have been removed

9.0 NON-TAX REVENUE MEASURES

All of the following amendments to the Transfer Pricing Act will take effect from 1st January 2021

8.1 INTRODUCTION OF COUNTRY BY COUNTRY REPORTING REQUIREMENTSIn order to effectively audit inter-company transactions for compliance with transfer pricing regulations, tax authorities require good quality data on the two entities involved in inter-company transactions. Historically, the lack of data on corporate taxation of foreign-based related entities has presented a major limitation for tax authorities making it difficult to carry out transfer pricing assessments on transactions between related companies.

Taking the above into account, the proposal

provides for amendment of the Income Tax (Transfer Pricing) (Amendment) Regulations 2018 to introduce Country by Country (CbC) reporting requirements. Introduction of CbC reporting requirements will allow for automatic exchange of corporate taxation data with other tax jurisdictions for entities operating in Zambia that are part of Multi-National Enterprise groups.

8.2 INCREASE OF TRANSFER PRICING DOCUMENTATION EXEMPTION THRESHOLD Zambian companies that are not part of a Multi-National Enterprise Group and have turnover below K20 million are currently exempt from the requirement to prepare transfer pricing documentation. The proposal increases the exemption threshold from K20 million to K50 million annually.

8.0 TRANSFER PRICING

12


Zambia has over 20 double taxation treaties...“

10.0 DOUBLE TAXATION TREATIES

CountryApplicable Tax Rates

Consultancy Dividends Interest Royalties Fees

Botswana 5% or 7% 10% 10% 10%Canada 15% 15% 15% 0%China 5% 10% 5% 0%Germany 5% OR 15% 10% 10% 0%India 5% OR 15% 10% 10% 10%Ireland 7.5% 10% 10% 0%Italy 5% or 15% 10% 10% 0%Japan 0% 10% 10% 0%Kenya 20% 20% 20% 0%Mauritius * TBA TBA TBA TBANetherlands 5% OR 15% 10% 10% 0%Norway 15% 10% 15% 0%Seychelles 5% or 10% 5% 10% 0%South Africa 15% 15% 20% 20%Sweden 5% OR 15% 10% 10% 0%United Kingdom 5% or 15% 10% 5% 0%

This is a selection of countries most commonly transacted with and is not a comprehensive list. For further details please contact us.

The rates available under the various DTAs are not automatic and have to be applied for.

* The current treaty with Mauritius expires 31 December 2020. A new treaty has not yet been negotiated

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BDO Zambia is a firm of public accountants, registered with the Zambia Institute of Chartered Accountants, providing

audit, accounting, taxation, management and consulting services to some five hundred clients of varying sizes and needs. BDO Zambia is part of the BDO International network. Presently with 6 Partners and over 100 professional and administrative staff in our Lusaka offices, the Firm places particular emphasis on providing a personal and value for money service, through constructive and effective advice and financial planning and control. In addition to our own team of financial experts, the Firm has a number of qualified professionals providing advice on matters such as Human Resources Management and Legal Draftsmanship.

We have cut out needless bureaucracy, so we can serve you responsively and flexibly. Our systems work to support our people, not the other way around. That gives us more time to get to know you and your business – and give more relevant, intelligent advice.

With the backing of the BDO international network, we are able to combine global coverage with local knowledge. Our close relationship with BDO South Africa and BDO UK provides us with additional resources and expertise to meet business requirements in Zambia. The Partners, Directors and staff of BDO Zambia have established the Firm and its related specialised business entities as the preferred provider of Financial Services in the country. We have a commitment to total and exceptional client service and we build an understanding of our clients’ businesses that allows us to play an active role in their success.

PROVIDING A PERSONAL AND VALUE-FOR-MONEY SERVICE THROUGH CONSTRUCTIVE AND EFFECTIVE ADVICE, FINANCIAL PLANNING AND CONTROL.

11.0 ABOUT US

Staff

billion2019 REVENUE

Offices

BDO INTERNATIONAL

US$9.6

167

Coun

trie

s 1,61788,000+

* Increase from 2018: 10.1% year-over-year growth

14


YOUR BDO TEAMLEADING THE WAY

William Saunders

[email protected] Partner

Douglas Ironside


Katrina Mabika

[email protected]

Tax Partner

Deborah Nonde


Godsave Nhekede


Tinashe Jerahuni


15

mailto:[email protected]







OUR COMMITMENT TO SERVICE EXCELLENCE, PROFESSIONALISM AND

CLIENT SATISFACTION HAS POSITIONED US SECURELY AS ONE OF THE LEADING TAX

AND ACCOUNTING ORGANISATIONS IN THE WORLD.

YOUR BDO TAX MANAGERS

Stanley [email protected]

Kafumu [email protected]

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Z A M B I A T A X T A B L E S 2 0 2 1( 1 2 m o n t h s e n d i n g 3 1 D e c e m b e r 2 0 2 1 )

PERSONAL TAXATION (Monthly) 0 - K4,000 0% K4,001 – K4,800 25% K4,801 – K6,900 30% Above K6,900 37.5%

Tax credit for differently abled persons K500 Car Benefits *2800cc & above K40,000 *1800cc to 2799cc K30,000 *Up to 1799cc K18,000

BUSINESS TAXATION RATECorporate Income Tax 35% Farming & agro-processing 10% Manufacture of organic & chemical fertilizers 15% Tourism (Accommodation & Food) 15%Mining Operations - *Profit up to 8% 30% *Profit above 8% up to 45% Mineral processing 35% Companies that add value to copper cathodes 15%Non-traditional exports 15% Export of cotton without a permit 35% Income on commercial activities of Public benefit organisations 15% Turnover Tax 4%(for annual turnover below K800,000) Telecommunication Companies - *First K250,000 35% *Above K250,000 40%

Tax losses can be carried forward for up to 5 years (10 years for companies in the energy & mining sector)

Annual allowance to employer for employing a person with a disability K2,000

CAPITAL ALLOWANCES RATEPlant, machinery & commercial vehicles 25% Non-commercial vehicles 20%

Industrial buildings * investment allowance 10% *initial allowance 10% *annual allowance 5% Commercial buildings 2% Farm works & improvements 100% Equipment used in farming & agro-processing 100%Equipment used in manufacturing,tourism & generation of electricity 50% For leasing companies - equipment leased out under an operating lease 50% Improvement allowance in an MFEZ 100% Development allowance on growing of roses, tea, coffee, banana plants 10% The number of years for claiming development allowance 5 yearsMining sector for assets in use 20%

WITHHOLDING TAX Rental income (final tax) 10%Commission to non-employees 15%Royalties, management & consultancy 15%Dividends & interest 15%Dividends for companies carrying on mining operations Nil

WHT FOREIGN ENTITIESCommissions 20%Royalties, management & consultancy fees 20% Dividends, interest and branch profits 20% Payments to non-resident entertainers & sports persons 20%Government Securities 15%

BDO Zambia Limited is a member of BDO International Limited, a UK company limited by guarantee.

BDO is the brand name for the BDO International network and for each of the BDO member firms.

CONTACT US AT

BDO LusakaGallery Office Park Lagos Road, Rhodes Park PO Box 35139Lusaka, Zambia

Tel: +260 211 252 836 / 250 222 / 250 [email protected]

www.bdo.co.zm

The information contained in this document and the enclosed bookmark is based on the Budget Address presented by the Minister of Finance, Honourable Dr. Bwalya Ng’andu, MP. This document provides an overview of the announcements made in the speech and information provided by the Zambia Revenue Authority. Whilst every effort has been made to ensure its accuracy, we are unable to accept responsibility for errors and omissions. It should be noted that the measures as introduced by the Budget Address are subject to Parliamentary approval. No financial decisions should be made based solely on the information contained herewith and no liability will be accepted for decisions based on its contents without further consultation with an official representative of BDO Zambia Limited.


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zambia national budget 2021

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