Finance Minister of Zambia presented the 2018 National Budget for the year 1 January 2018 to 31 December 2018 to the National Assembly on 29th September 2017. Budget for 2018, which lays out the various expenditure and revenue measures aimed at achieving Government policy objectives.

Budget highlight for 2018

Direct taxes:

  • There has been no change to the annual income tax bands (PAYE rates) for 2018;
  • Abolishing Five year exemption from income tax under the ZDA Act;
  • Increase capital allowances for qualifying investments in priority sectors;
  • Speculative taxes on public service vehicles to increase by 50%;
  • In order to facilitate expansion of the country’s industrial base, the development of multi-facility economic zones and industrial parks will continue;
  • The focus in the mining sector in 2018 will be on broadening the tax base and enhancement of mineral production to include nontraditional minerals, such as gemstones and industrial minerals among others;
  • The allowable deduction for contribution to approved pension funds of K255 per month, has been removed;
  • 5 years exemption from Customs Duty on imports of machinery and equipment acquired for use on the project.

Definition of management or consultancy fees:

It is proposes to revise the definition of residence for persons other than individuals as well as the definition for management or consultant fee.“Management or consultancy fee” means payment in any form, other than an emolument, for or in respect of any administrative, consultative, managerial, technical, or any service of a like nature or any creation, design, development, installation and maintenance of any information technology solution, programme, system, or a combination.

Definition of residency:

It is proposes to amend the definition of residence for persons other than individuals. The term “residence” for corporation tax by replacing the reference to “central administration and control” by “place of effective management” administration”. The place of effective management of the person’s business or affairs is in Zambia for that year.

Transfer pricing:

It is international practice that related parties are treated the same under certain rules such as transfer pricing. Accordingly, Minister propose to mandate all businesses to disclose their related parties for income tax and property transfer tax purposes.

Submission of tax returns and payments:

  • Propose to change the due dates for submission of the VAT returns from the 16th to the 18th of every month. This will differentiate this date from the date for submitting withholding VAT returns, which also falls on the 16th of every month;
  • Same due date of the 14th of every month, for submission and payment of withholding tax, to ease compliance and improve tax administration.