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Our Mission

To optimise and sustain revenue collection through integrated,


efficient, cost effective and transparent systems, professionally
managed to meet the expectations of all stakeholders.
Our Vision
To be a world class organisation recognized as a beacon of excellence
in revenue administration

CONTENTS
PAGE
1.0

GENERAL

2.0

INTRODUCTION

3.0

DEFINITIONS

4.0

TYPES OF PAYMENTS SUBJECT TO WHT S.82A

5.0

OTHER PAYMENTS SUBJECT TO WITHHOLDING TAX

S.81 AND S. 81A


6.0

COMMISSIONER-GENERALS DIRECTION

11

7.0

DUE DATES

11

8.0

PENALTIES

12

9.0

FORMS IN USE

12

10.0

DOMESTIC TAXES OFFICES

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GENERAL
This PRACTICE NOTE describes the provisions of Sections 81, 81A
and 82A, which relate to the deduction of withholding tax from certain
types of payments. It takes into account the various changes that have
occurred since the last issue of 2003 and reflects the current status for
the charge year 2015.
The commentary is for general guidance only and is not intended to
substitute the law in any particular case. It is therefore not exhaustive
and does not affect any person's right of appeal on any point concerning
their liability to tax, nor does it preclude any discretionary treatment
which may be allowed under the law.
Enquiries may be made through the National Call Centre of Zambia
Revenue Authority, your nearest Client Service Centre or any Domestic
Taxes Office.

Berlin Msiska
COMMISSIONER-GENERAL

2.0

INTRODUCTION
A withholding tax is deductible from a payment by the person who is liable to
make the payment (the payer) at the point in time the person to whom it is
due to be made (the payee) becomes legally entitled to it (the date of
accrual).
Withholding tax was first introduced in Zambia on interest, management
and consultancy fees, royalties and public entertainment fees in 1971. The
withholding tax has over the years been extended to dividends, rents,
commissions and payments to non-resident contractors.

3.0

DEFINITIONS
In this Practice Note, the following words and expressions will have the
following meaning:

3.1

Date of accrual
This is the date on which payment is legally due to the payee. This is also the
date on which tax is deductible regardless of whether the actual payment
has been made or not to the payee. The date of accrual determines the date
by which the tax deductible is payable to the Zambia Revenue Authority.

3.2

Payee
The person legally entitled to receive a payment.

3.3

Payer
This is the person who is liable to make a payment to the payee and also
responsible for deducting and remitting tax to the Zambia Revenue
Authority.

4.0

TYPES OF PAYMENTS WHICH ARE SUBJECT TO WITHHOLDING TAX


UNDER SECTION 82A
Withholding tax is deductible on the date of accrual of any amount due to a
payee. The amount from which tax is to be deducted is the total amount
payable before any deduction whatsoever (gross). However, for a WHT on

a payment such as commercial rent where the supplier is registered for


Value Added Tax (VAT) the tax treatment should be as illustrated in Example
2 below:
Example 1- Non VAT registered supplier (e.g Rental Payment)
K
10,000.00
1,000.00
9,000.00

Gross Amount
Withholding Tax @ 10 %
Amount Net of WHT

Example 2 VAT registered Supplier


Zed Limited, a VAT registered supplier rents out its property at K10, 000 per
month (VAT exclusive) to Mr. Rich. Zed Limited is required to charge VAT on
the K10,000 rental amount at 16%, whilst Mr. Rich is required to deduct
WHT at 10% on the K10,000 (VAT exclusive amount) when making the
payment to Zed Limited. It should be noted that Zed Limited is liable to the
10% WHT under Income tax which will be deducted by Mr. Rich and Mr. Rich
is economically liable to the VAT that will be charged by Zed Limited.

Gross Rental Amount before VAT


VAT included @ 16 %
Total Invoiced Rental Amount (VAT inclusive
amount)
WHT@ 10% of Gross Rental Amount
VAT@16% of Total Invoice Amount

K
10,000.00
1,600.00
11,600.00
1,000.00
1,600.00

Note:
From example 2 it can be seen that both the WHT and VAT are applied on
the same contractual payment, that is, the K10, 000.00.
Mr Rich will thus pay a total of K11, 600.00 of which K1, 000.00 will be
remitted to ZRA as WHT and K10, 600.00 will be paid to Zed Limited. Zed
Limited will be required to declare K1, 600.00 as output VAT to ZRA.

4.1

Interest
Interest is not defined in the Income Tax Act, but it is to be taken as an
amount calculated according to a fixed ratio on debt or money lent. Interest
can be earned on savings or deposit accounts, treasury bills, government
bonds or any other financial instruments.

4.1.1

Government Bonds, Corporate Bonds and Treasury Bills


The withholding tax rate on interest earned on government or corporate
bonds and Treasury Bills is 15%. This tax is final for individuals and for
organisations that are exempt from Income Tax as per Second Schedule to
the Income Tax Act (Exempt Organisations). The implication for Exempt
Organisations is that despite their income being exempt, they are liable to
tax on interest arising from government or corporate bonds, treasury bills
and other financial instruments or securities (Securities in this regard are as
defined in the Securities Act).
Exempt organisations include; Approved Public Benefit Organisations,
Local Authorities, Statutory Bodies, Approved funds, Collective Investment
Schemes etc.
The final tax rate for companies and other organisations is at 35% and thus
eligible to the credit on WHT deducted when determining the final liability
payable.

4.1.2

Interest earned on deposit and savings accounts


The withholding tax rate for interest earned on deposit and savings
accounts held with financial institutions including building societies is 0% for
both resident and non-resident individuals and 15 % for others.

4.1.3

Other Interest
Withholding tax on any interest not falling under 4.1.1 and 4.1.2 is at the rate
of 15% and is final tax for individuals.

4.1.4

Exempt Interest
Notwithstanding paragraph 4.1.1 the following interest is exempt from tax;

a) interest on any public loan raised by the Government or a statutory


corporation, where the terms of the loan provide that the interest thereon
shall be exempt from tax;
(b) interest on any bond issued under or in respect of a loan of the kind
described in clause (a).
4.2

Royalties
Royalty is defined in the Income Tax Act as a payment in any form received
as a consideration for the use of, or the right to use, any copyright of literary,
artistic, or scientific work (including cinematograph films and tapes for radio
or television broadcasting), any patent, trademark, design or model, plan,
secret formula or process, or for the use of, or the right to use, industrial,
commercial or scientific equipment, or for information concerning industrial,
commercial or scientific experience.
The rate of withholding tax on royalties is 15% for residents and 20% for nonresidents. However, in the case of non-residents, this is the final tax.
Some examples of Royalties are payments for the rent of cinematograph
films whether those films are exhibited in cinemas or television and income
from leasing. Payment for the use of equipment under an operating lease
also attracts withholding tax.

4.3

Rents
Rent means a payment in any form including a fine, premium or any like
amount, made as a consideration for the use or occupation of or the right to
use or occupy any real property including personal property directly
connected with the use or occupation or the right to use or occupy such real
property. It is important to note that the property from which rentals the
withholding tax is deducted must be situated in Zambia.
The rate of withholding tax is 10% and is the final tax.
The payer (tenant) is responsible for deducting withholding tax from gross
rentals on the date of accrual of any amount due to the payee (landlord). The
tenant should remit the amount so deducted to the Zambia Revenue
Authority.

4.4

Management and Consultancy Fees


Management or consultancy fee means payment in any form, other than an
emolument, for or in respect of any creation, design, development,
installation and maintenance of any information technology or solution,
programme or system, administrative, consultative, managerial, technical
or consultative or any service of a like nature.
It should be noted that withholding tax is deductible from payments to a
payee who is not in business in Zambia but renders a service to a person
carrying on business in Zambia. It does not matter whether the service is
rendered in Zambia or not.
The rate of withholding tax is 20%.
Where a payment is made to a person carrying on business in Zambia, no
withholding tax should be deducted. Such persons in receipt of
management or consultant's fees are required to pay tax under the normal
income tax system. These taxpayers are, among other tax obligations,
required to submit provisional and annual income tax returns even if their
income per annum is below the turnover tax threshold.

4.5

Public Entertainment Fees


Public entertainment fee means a payment in any form other than an
emolument to, on behalf of, or in respect of, any person or persons in
partnership, including theatre, motion picture, radio or television artists,
musicians, athletes or sports persons, in respect of those persons' personal
activities in any entertainment, competition or similar activity within the
Republic
The withholding tax is deductible from payments made to non-resident
entertainers and sportsmen for performances within Zambia. These would
include non-resident: singers, musicians, actresses, comedians etc. The
responsibility to withhold is on the promoter of the event or any other person
managing the affairs of such foreign artist.
The withholding tax rate is 20% and is the final tax.

4.6

Commissions
A commission that is subject to withholding tax is any commission other than
a commission received by an individual whose income is from employment
or office.
The withholding tax rate for residents is 15% and 20% for non-residents.
The tax is not final for residents but is final tax for non-residents.

4.7

Winnings from Gaming, Lotteries and Betting


The Income Tax Act was amended in 2014 to introduce the requirement to
deduct withholding tax at the rate of 20% on winnings from gaming, lotteries
and betting. All winnings from gaming, lotteries and betting in money or
money's worth shall be subject to withholding tax. Examples include
winnings from raffle draws, commercial promotions and radio/television
promotions or winnings from any other game of chance.
Where the winning is in the form of a service or tangible good (e.g. house,
car, holiday package, etc), the tax shall be levied on the value of the service
or the good respectively. Below are examples illustrating how the values are
to be determined:
Example 1
Mr. X wins a house worth K250, 000.00 in a promotion. The promoter
will deduct and remit withholding tax of K50, 000.00 to Zambia Revenue
Authority;
Example 2
Ms. Y wins a holiday package worth K20, 000.00 in accommodation and
food, K8, 000.00 air tickets and K2, 000.00 for incidentals.
The promoter will account for withholding tax as follows:
Accommodation and Food
K20, 000.00
Air Tickets
K 8,000.00
Incidentals
K 2,000.00
Total
K30, 000.00
WHT @ 20%

K 6,000.00

5.0

OTHER TYPES OF PAYMENTS

5.1

Dividends - Section 81
Dividend means any amount distributed or credited as construed in subsection (3) by a company to its shareholders;
Subsection three of section two provides as follows;
3) The reference in the definition of "dividend" to amount distributed or
credited" shall be read and construed (a)

so as to include (i) in relation to a company that is being wound up or liquidated, any profits
distributed, whether in cash or otherwise, other than those of a capital
nature, earned before or during the winding up or liquidation;
(ii) in relation to a company that is not being wound up or liquidated, any
profits distributed whether in cash or otherwise, other than those of a
capital nature, including the value of that element of any shares
awarded to its shareholders which is redeemable or capable of
redemption by conversion and any debentures or securities awarded
to its shareholders by a company;
(iii) In the event of the partial reduction of the capital of a company, any
cash or the value of any asset which is given to the shareholder in
excess of the cash equivalent of the nominal value by which the shares
of that shareholder are reduced; and
(iv)in the event of the reconstruction of a company, any cash or the value of
any asset which is given to the shareholder in excess of the nominal
value of the shares held by him before reconstruction;

(b) so as not to include any cash or the value of any asset given to a
shareholder, to the extent to which the cash or the value of the said asset
represents a reduction of the share premium account of the company.
All Companies incorporated in Zambia are required under this section to
deduct withholding tax from payments of dividends other than dividends
paid to the Government of the Republic of Zambia.

Tax is deductible on the date of accrual. Dividends accrue on the day of the
resolution provided that where the resolution states that the dividend is to be
paid to shareholders or stockholders registered on a day in the future, then
the dividend is deemed to accrue on that day.
The rate of withholding tax is 15% and it is the final tax for residents and non residents.
Note however that, for companies carrying out mining operations and for a
dividend declared by a company listed on the Lusaka Stock Exchange to an
individual, the rate is 0%.
5.2

Payments to Non- Resident Contractors Section 81A


These are payments made to non - resident contractors who are engaged in
construction and haulage operations.
Non resident contractor means;
i) An individual who is neither resident nor ordinarily resident in Zambia;
or
ii) any other person or partnership who is not resident in Zambia and does
not have a permanent establishment in Zambia.
Construction operations include
i) The erection, alteration, maintenance, repair, extension, demolition or
cleaning of any building or structure, whether permanent or not;
ii) The installation in any building or structure of heating, lighting, lift, air
conditioning, ventilation, power, drainage, sanitation, water, fire
protection or like supplies or services;
iii) The painting or decoration of the internal or external face of any building
or structure; and
iv) Any operations which are an integral part of or prior to or to render
complete the operations described in paragraphs (i) and (iii) above.
Haulage operations are defined in the Act as including the transportation by
land, water or air of persons, livestock, or any goods whatsoever including
farm produce or produce of a like nature or ores and minerals, food stuffs
and merchandise.
The withholding tax rate is 20% and is the final tax.

10

Where a non-resident contractor has created a permanent establishment in


Zambia in accordance with Section 81AA, the payments made to such a
person shall not be subjected to a deduction of withholding tax.
In this case, the permanent establishment will be required to register with the
Zambia Revenue Authority and account for tax either under the normal
income tax or the turnover tax system, whichever is applicable.
Other tax obligations for the permanent establishment include operating a
PAYE Scheme for the employees.
6.0

COMMISSIONER- GENERAL'S DIRECTION


In certain cases, the payee happens to be in a country which has a Double
Taxation Agreement (DTA) with the Republic of Zambia. The payer is
required to make an application for a directive from the CommissionerGeneral to restrict the deduction of tax to the rate specified in the respective
Double Taxation Agreement. Before a direction can be given, the
Commissioner- General has to be satisfied that conditions as stipulated in
the respective DTA are fulfilled.

i)

In order to be granted benefits as provided for under the tax treaty, the
claimant will be required to do the following:
lodge in an application by completing fully the Double Taxation Relief form
providing details such as name of the Zambian payer, amounts of the
payment made and the type of payment etc.

ii) obtain a tax residence certificate from the tax authorities of the other State.
Alternatively, the claimant may request that Double Taxation Relief form be
endorsed by the tax authorities in the other State.
iii) submit a copy of the Agreement/Contract entered into for the provision of the
loan, services or use of the intellectual property. In the case of dividends, a
record of the minutes authorising the declaration and payment of the
dividends should be availed.
7.0

DUE DATES
The tax deducted must be remitted to the Zambia Revenue Authority by the
fourteenth of the month following the month in which the deduction was
made. For example, withholding tax, which was deducted in the month of

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January 2015, is due for payment on or before 14th of February 2015.


Payments made after the 14th, will be regarded as late and attract interest
and penalties.
8.0

PENALTIES
A penalty of 5% of tax unpaid is payable for each month, or part thereof, that
the tax remains unpaid. In addition, interest is payable at Bank of Zambia
discount rate plus 2%.

9.0

FORMS IN USE
Under the TaxOnline system, the Return of Withholding Tax covers all forms
of payments of withholding tax.

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10.0 DOMESTIC TAXES CONTACT ADDRESSES:


If you have any problems concerning your taxes, please contact the Client Services Centres or
your nearest Domestic Tax Office at the following addresses:

Client Services Centre


New Revenue Hall
Private Bag W136
Lusaka
Tel: Zamtel Network: (01) 383201
Airtel Network: 0971 283201
Fax: 021 1 226227

Client Services Centre


Nchanga House
P. O. Box 20454
Kitwe
Tel: Zamtel Network: (01) 38 4420
Airtel Network: 0971 28 4420
Fax: 021 2 222942

Client Services Manager Large Taxpayer Office


6th Floor, Revenue House
P.O. Box 35710
Lusaka
Tel: Zamtel Network: (01) 38 2626
Airtel Network: 0971 28 2626
Fax: 021 1 220283

Assistant Director
Design & Monitoring - Taxpayer Services
P .O .Box 35710
Lusaka
Tel: Zamtel Network: (01) 382505
Airtel Network: 0971 28 2505
Fax: 021 1 221075

Assistant Director
Design & Monitoring Policy & Legislation
P .O .Box 35710
Lusaka
Tel: Zamtel Network: (01) 38 2504
Airtel Network: 0971 28 2504
Fax: 021 1 221075

Assistant Director
Design & Monitoring Processing and Enforcement
P .O .Box 35710
Lusaka
Tel: Zamtel Network: (01) 38 2502
Airtel Network: 0971 28 2502
Fax: 021 1 221075

Assistant Director
Design & Monitoring Audit
P .O .Box 35710
Lusaka
Tel: Zamtel Network: (01) 38 2506
Airtel Network: 0971 28 2506
Fax: 021 1 221075

Assistant Director
Large Taxpayer Office Non-mining Audit Unit
P .O .Box 35710
Lusaka
Tel: Zamtel Network: (01) 38 2602
Airtel Network: 0971 28 2602
Fax: 021 1 220283

Assistant Director
Large Taxpayer Office Processing
and enforcement
P .O .Box 35710
Lusaka
Tel: Zamtel Network: (01) 38 2604
Airtel Network: 0971 28 2604
Fax: 021 1220283

10

Assistant Director
Large Taxpayer Office Mining Audit Unit
P .O .Box 35710
Lusaka
Tel: Zamtel Network: (01) 38 2605
Airtel Network: 0971 28 2605
Fax: 021 1 220283

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Assistant Director
Small Taxpayer Office - Lusaka
P .O .Box 35710
Lusaka
Tel: Zamtel Network: (01) 38 3237
Airtel Network: 0971 28 3237
Fax: 021 1 229744

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Assistant Director
Small Taxpayer Office - Copperbelt
P.O. Box 70181
Ndola
Tel: Zamtel Network: (01) 38 4101
Airtel Network: 0971 28 4101
Fax: 021 2 614096

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Assistant Director
Medium Tax Office South
P .O .Box 35710
LUSAKA
Tel: Zamtel Network: (01) 38 2100
Airtel Network: 0971 28 2100
Fax: 021 1 229744

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Assistant Director
Medium Tax Office North
P .O .Box 20855
Kitwe
Tel: Zamtel Network: (01) 38 4500
Airtel Network: 0971 28 4500
Fax: 021 2 229942

15

Provincial Manager
Small Taxpayer Office - Central
P.O. Box 80909
Kabwe
Tel: Zamtel Network: (01) 38 1005
Airtel Network: 0971 28 1005
Fax: 021 5 223642

16

Provincial Manager
Small Taxpayer Office - Western
P.O. Box 910110
Mongu
Tel: 021 7 221662
Fax: 021 7 221662

17

Provincial Manager
Small Taxpayer Office - Eastern
P.O. Box 510632
Chipata
Tel: 021 6 221155
Fax: 021 6 221155

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Provincial Manager
Small Taxpayer Office - Southern
P.O. Box 60597
Livingstone
Tel: Zamtel Network: (01) 38 3803
Airtel Network: 0971 28 3803
Fax: 021 3 320772

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Provincial Manager
Small Taxpayer Office - Luapula
P.O. Box 710112
Mansa
Tel: Zamtel Network: (01) 38 1700
Airtel Network: 0971 28 1700
Fax: 021 2 821147

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Provincial Manager
Small Taxpayer Office North-Western
P.O. Box 110368
Solwezi
Tel: 021 8 821682
Fax: 021 8 821682

Provincial Manager
Kasama Tax Office
P.O. Box 410728
Kasama
Tel: 021 4 221810
Fax: 021 4 221810

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National Call Centre


New Revenue Hall
Private Bag W136
Lusaka
Tel: Zamtel Network: (01) 381111
Airtel Network: 0971 281111
Or 5972

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Website: http://www.zra.org.zm

14

Our Values
Our commitment to serving Government, taxpayers, employees and other stakeholders is reflected in our
Corporate Values:
Integrity

: exhibiting the highest standards of personal probity and behaviour;

Professionalism

: performing official duties with skill, care and diligence; and providing the public with
service and advice in a professional manner;

Fairness

: performing official duties in an impartial manner free of political, personal or other


biases;

Equity

: treating all taxpayers, colleagues and members of the public equitably in


accordance with the provisions of legislation and procedures in force;

Courtesy

: treating all taxpayers, colleagues and members of the public with courtesy and
being sensitive to their rights, duties and aspirations;

Teamwork

: working as a team, not only to reinforce each other's divisional functions, but also at
collegiate level in order to strengthen mutual confidence, respect and trust

Value for Money

: avoiding wastage and extravagant use of resources;

Confidentiality

: upholding the highest level of secrecy in respect of information that comes to one's
knowledge in the course of duty;

Goal orientation

: focusing on the development and achievement of personal and organisational


goals in the course of duty;

Innovation

: consistently improving on quality, quantity, timeliness and cost.

For more information contact:


+260 211 381111/0971-281111/
5972 / 0962251111
Email us at: advice@zra.org.zm
Website: www.zra.org.zm
Revenue House: P O Box 35710
Lusaka, Zambia