Zambia’s 2026 tax measures introduce higher thresholds and reduced penalties for MSMEs, targeted corporate incentives in energy, agriculture and manufacturing, expanded VAT zero-rating (including piped water), and climate-aligned vehicle and plastic taxes. 

RF Report

Zambia’s Ministry of Finance and National Planning delivered the 2026 Budget Speech to the National Assembly on 26 September 2025, announcing a series of revenue measures aimed at strengthening domestic resource mobilisation, supporting small businesses, and promoting investment in key sectors.

Corporate tax and business-focused incentives:

Support for micro, small and medium enterprises (MSMEs)

  • Higher tax-exempt thresholds for both turnover tax and rental income tax, increased from K1,000 to K2,500 per month.
  • For artisanal and small-scale miners, the turnover tax threshold will increase from K800,000 to K5,000,000.
  • Penalties for late turnover tax payments will be significantly reduced from 5% to 0.5%.

Corporate incentives in energy, agriculture and manufacturing:

Electricity sector

  • Duty relief will apply to machinery needed for electricity transmission and distribution.
  • Hydropower companies will now have 10 years, instead of seven, to claim VAT refunds on eligible goods purchased before commercial operations begin.

Livestock and dairy value addition

  • Higher customs duty on imported powdered milk—40% when resold and 25% for processing, up from 25% and 15%.
  • Cheese, yoghurt, and long-life milk imports will also face a 40% customs duty.
  • Machinery for pasteurisation will be duty-free from the previously imposed 15% customs duty.
  • A 2% local content allowance will now apply to income from value addition in milk and raw hides.

VAT reforms

A key consumer-focused VAT proposal is the zero-rating of piped (mains) water, which will make water supply VAT-free and ease household bills.

Additionally, businesses involved in hydropower generation will benefit from extended VAT refund periods before the commencement of commercial operations.

Climate measures and vehicle taxation

  • The excise duty on new hybrid vehicles is reduced from 30% to 15%.
  • Used hybrid vehicles will transition from ad valorem valuation to specific duty rates, thereby improving predictability.
  • Excise duty on single-use plastics increases sharply from 30% to 100%.

Other notable tax adjustments

  • Removal of the five-year limitation on carry-forward of disallowed interest is beneficial for capital-intensive companies.
  • Higher tax deductions for companies employing persons with disabilities, raised from K2,000 to K2,500.
  • Advance income tax will be expanded to cover all remittances, thereby tightening revenue collection.
  • Rail transport is set to receive new incentive packages to help revive the sector.
  • Firearms will be subject to increased customs duty and a new 30% excise duty on both guns and ammunition.
  • Buses with 50 or more seats will no longer be taxed under the presumptive tax; instead, they must register under the turnover tax or the corporate income tax.
  • Mains (piped) water will be zero-rated for VAT, benefiting households and reducing business operating costs.