The national budget for 2026 proposes amendments to key tax laws to enhance revenue, provide targeted relief, promote equity, support economic formalisation, and align with international standards.

Zambia’s Minister of Finance and National Planning, Dr Situmbeko Musokotwane, presented the 2026 national budget to parliament on 26 September 2025. He outlined proposed amendments to the Income Tax Act, the Value Added Tax Act, the Customs and Excise Act, and the Mobile Money Transaction Levy Act.

The 2026 income tax measures aim to balance domestic resource mobilisation with targeted relief to drive growth, while promoting tax equity, encouraging economic formalisation, and aligning Zambia’s tax system with international standards and best practices.

Increase in tax-exempt thresholds for turnover tax and rental income

The budget proposes increasing the tax-exempt threshold for turnover tax and rental income tax to ZMW 2,500 from ZMW 1,000 per month.

Increase in tax-exempt thresholds for artisanal and small-scale mining income

An increase in the turnover tax threshold for artisanal and small-scale mining to ZMW 5,000,000 from ZMW 800,000 is proposed.

Reduced penalty for late payment of turnover tax liabilities

The budget proposes reducing the penalty for late turnover tax payment to 0.5% from 5.0%. This significant tenfold reduction aims to ease financial burdens on micro, small, and medium enterprises (MSMEs).

Taxation of income from large-capacity passenger buses

It is proposed that income from buses with a seating capacity of more than 50, used for passenger transport, be taxed under either Corporate Income Tax or Turnover Tax, depending on the operator’s annual turnover.

Increase in customs and excise duties for the dairy sector

  • Customs duty on powdered milk will rise to 40% for resale and 25% for further processing, up from 25% and 15%.
  • A 10% surtax will be applied uniformly to imported milk, cheese, and yoghurt.
  • Customs duty on cheese, yoghurt, and long-life milk will increase from 25% to 40%.
  • The 15% duty on milk pasteurisation machinery will be removed.
  • The 2% local content allowance will be extended to income from value addition to milk, raw hides, and skins.

Duty relief and VAT refund incentives for the energy sector

The budget proposes:

  • Duty exemptions for machinery and equipment used in the transmission and distribution of electricity.
  • Extending the period during which a hydroelectricity generation business can claim a refund on VAT paid for eligible goods before the start of commercial operations from seven years to ten years.

Increase in customs duty for firearms and ammunition

  • Harmonise customs duty on firearms by increasing it to 25%.
  • Introduce a 30% excise duty on firearms and ammunition.

Mobile money transaction levy

The budget proposed plans to raise mobile money levies to boost revenue, which could slow the rapid growth of mobile transactions and impact financial inclusion progress.

Additional tax measures

  • Reducing the excise duty on selected new hybrid vehicles from 30% to 15%.
  • Increasing the excise duty on single-use plastics from 30% to 100%.
  • Zero-rate the supply of mains (piped) water for VAT purposes.
  • Remove the five-year carry-forward limitation on disallowed interest.
  • Increase the allowable income tax deduction for companies employing persons with disabilities from ZMW 2,000 to ZMW 2,500.
  • Extend the charge of advance income tax to cover all remittances.

The proposed tax measures will be included in tax bills to be released at a later date and are intended to take effect on 1 January 2026.