ACCOUNTANCY ANALYSIS
TOURISM: • Zero rated for VAT - tourist packages. • Zero rated for VAT - other tourist services. • No import VAT on all goods temporarily imported in the country by foreign tourists. • Refund to non-resident tourists and visitors i.e. those not holding a Zambian passport.
PROVISIONAL TAX: A provisional estimate of tax payable for the year and is deducted against the final tax payable, The law requires that at least two thirds of the tax liability is paid in provisional taxes. In the event that taxes are underpaid, an under-estimation penalty of 25% of the tax that has been underpaid is charged.
ELECTRICITY GENERATION: Zambia is a land-linked country with many water bodies that are a source of hydro-electricity generation. Due to an increase in consumption of power in the region; Zambia has been an exporter of electricity in the region. The Government would like to get more investors into this sector, as a result electricity tariffs were increased as well as better tax incentives introduced in this industry.
TAX LOSSES: Losses are carried forward for a period of 5 years to be offset against future taxable profits for non-mining companies. Due to the diversification of the economy and the need for private participation in certain industries like electricity generation, the period to carry forward tax losses is 10 years.
CAPITAL ALLOWANCES: a tax depreciation on fixed assets at prescribed rates, are provided for in the Income Tax Act. Below are rates on qualifying expenditure.
COMMON DEDUCTIBLES: • All expenses incurred wholly and exclusively for business purposes by a company are tax deductible. They must be revenue and not capital in nature and realised. Further, Losses and expenditure must be offset against the same source income. • Benefits that cannot be converted into money or money’s worth are taxable on the company. • Leasing; these are amounts that cannot be converted into money’s worth. Any other lease that is convertible into money’s worth is taxable under PAYE. • Regarding motor vehicles to employees on a personal-to-holder basis, the benefit to be disallowed in the employer’s tax computation depends on the engine capacity of the vehicle. • Expenses incurred on entertainment, hospitality and gifts are generally not allowable. OTHER INCOME: These are taxed separately, and this includes interest income, dividends, income from letting of property if that is not the main course of business, royalties etc.
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The 10% initial allowance is only granted in the first year that an item is put to use. Furthermore, capital allowances are granted every year based on the item category and the rate prescribed in that year, this is on a straight line basis. Disposal of assets. A balancing charge is a means of making sure you don’t claim too much tax relief on the cost of an asset. It will increase the amount of profit you have to pay tax on. A balancing charge is the opposite of a capital allowance, which reduces the amount of profit you have to pay tax on.
INCOME TAX RETURNS: this is a ZRA post registration requirement. ZRA operates a self-assessment system were a tax payer estimate there taxable profit/loss. Every company and individual has a Tax Payer Identification number (TPIN) as a unique number for tax purposes. The return must include the following information: • Tax computation and audited financial statements. • Shareholders, directors, place of board meetings held. • Proof of payment of taxes. HUGE TAX PAYMENTS: This may be liquidated through a time to pay agreement (TPA) and settled over a longer period of time. Penalties for late submission of a return are K600 per
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