On 1 January 2019, The Zambian government published budget for 2019 to the National Assembly.  Key modifications of tax rules are summarized as follows:

  • Limit the deductibility of interest on debts owed by a taxpayer to 30 % of the Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) for purposes of company income tax
  • Increase the withholding tax rate on dividends, interest and branch profit remittance to 20% from 15%;
  • Change the Turnover Tax regime to a flat rate of 4 percent from the graduated rates. This measure is intended to simplify the application of Turnover Tax. Currently, businesses with a turnover up to K800000.00 per annum are taxed based on turnover at the rate of 3 percent plus specific presumptive amount;
  • Allow assessments in transfer pricing cases to be made beyond the period of 6 years but not exceeding 10 years and the record retention requirement is increased from 6 years to 10 years in terms of transfer pricing documentation; and
  • Increase the penalties for non-compliance with Transfer Pricing Regulation to 80 million penalty units (K24,000,000) from 10,000 penalty units (K3000). Currently, the penalty for non-compliance with Transfer Pricing Regulations is 10,000 units which is equivalent to K3, 000.00.

The legal framework for the modification is still pending, but should be approved before the end of March 2019 and could already apply April.