Recently, the Zambian Government has published Practice Note No. 1/2022 which provides an overview of the various 2022 tax changes implemented through the Budget 2022 Amendment Acts. The most important changes are summarized below:
Corporate tax:
- A reduction in the standard corporate income tax rate from 35% to 30%, although the top marginal tax rate for telecommunication companies is maintained at 40% on income exceeding ZMW 250,000;
- The extension of the carry-forward limit for disallowed interest deductions from 5 years to 10 years for persons carrying on a mining operation or generating electricity, as well as a clarification that such excess interest is also subject to the 30% of EBITDA restriction;
- The reintroduction of the deductibility of mineral royalty for corporate income tax assessment purposes;
- The suspension of corporate income tax for persons carrying on the business of manufacturing ceramic products for the charge years 2022 and 2023 (0% tax rate provided);
- An extension of the 15% corporate income tax rate on income earned by hotels and lodges on accommodation and food services from 31 December 2021 to 31 December 2022;
- The reform of the rental income tax regime, with turnover tax charged at a rate of 4% on rental income up to ZMW 800,000 per annum and at a rate of 12.5% on income exceeding ZMW 800,000;
- An increase in the insurance premium levy rate from 3% to 5%;
- The introduction of a 20% withholding tax on reinsurance premiums paid to reinsurers not registered in Zambia; and
- It also includes measures to correct and clarify the transfer pricing regulations in relation to CbC reporting. Accordingly, the CbC reporting threshold is the local currency threshold of ZMW 4.795 billion, as opposed to the original thresholds of EUR 750 million or ZMW 4.795 billion.
