Government Insetives to Investers in Zambia (Tax)

GENERAL TAX INCENTIVES
The main general tax incentives include the following:
Income Tax:
1. Income earned by companies in the first year of listing on the Lusaka stock exchange qualifies for a 2% discount
on the applicable company tax rate in the particular sector, however companies with more than 1/3 of their
shareholding in the hands of Zambians qualify for a 7% discount;
2. Implements, machinery and plant used for farming, manufacturing or tourism qualify for wear and tear allowance
of 50% of the cost per year in the first two years;
3. Building used for manufacturing, mining or hotel qualify for wear and tear allowance of 10% of cost in first year
and 5% of cost per year in subsequent years;
4. Duty free importation of most capital equipment for the mining and agriculture sectors;
Corporation tax at 15% on income from :
a. farming;
b. fertilizer production;
c. non-traditional exports;
5. Farm works allowance of 100% of expenditure on stumping, clearing, prevention of soil erosion, bore holes,
aerial and geophysical surveys and water conservation; and
6. Development allowance of 10% of the cost of capital expenditure on growing of coffee, banana plants, citrus
fruits or similar plants.
7. Farm improvement allowance - capital expenditure incurred on farm improvement is allowable in the year of
incurring the expenditure.
8. Dividends paid out of farming profits are exempt for the first five years the distributing company commences
business.
9. Initial allowance of 10% on capital expenditure incurred on the construction or improvement of an industrial
building is deductible;
10. Foreign exchange losses of a capital nature incurred on borrowings used for the building and construction of an
industrial or commercial building are tax deductible.
11. Dividends declared by companies assembling motor vehicles, motor cycles and bicycles are exempt for the first
five years of initial declaration of dividends;
12. Carry Forward of Losses
Copper and Cobalt mining 10 years
Other mining 5 years
Non-mining 5 years
Farming and non-traditional exports 5 years
Value Added Tax:
1. Relief for VAT registered enterprises on imports of eligible capital goods. (VAT deferment);
2. Zero rate on export of taxable products;
3. Relief of vat on transfer of business as a going concern;
4. Equal treatment of services for vat-reverse vat;
5. Cash accounting for specialized associations e.g. association of building and civil engineering contractors;
6. VAT relief on input tax paid for purchases made by registered suppliers.
7. Input tax claim for three months prior to vat registration for businesses that have already commenced trading;
8. Reduction of VAT rate for investors in tax free zones.
VAT Sector-Specific Incentives
Agriculture
1. Input tax claim for three months prior to vat registration for businesses that have already commenced trading;
2. Reduction of VAT rate for investors in tax free zones.
Manufacturing
1. Refund of Zambian VAT on purchase and export of Zambian products by non-resident businesses under the
commercial exporters scheme;
2. Input tax claim for three months prior to registration for businesses that have already commenced trading.
3. Input tax claim for two years prior to commencement of production.
Mining
1. Input tax claim for five years on pre-production expenditure for exploration companies in the mining sector;
2. Zero rate on mining products for export.
Tourism
1. Zero rate - accommodation in Livingstone district up to 2009.
2. Zero rate - tour packages;
3. Zero rate-other tourist services;
4. Refund to non-resident tourists and visitors;
5. No import vat on all goods temporarily imported into the country by foreign tourists.
CUSTOMS DUTY INCENTIVES
Most capital equipment attract duty rates of 0 to 5 %.
Further, relief is granted under the Duty Draw Back scheme to qualify for the scheme, the following conditions must
be met:
􀂃 the company or individual must be in the manufacturing business
􀂃 the company or individual must be an exporter or intends to start exporting
􀂃 the company must be in any sector other than the mining sector.
NON –FISCAL INCENTIVES
Other than the generous tax incentives, the ZDA Act also provide for non –fiscal incentives. Investors, who invest at
least US$250,000 and employ not less than 200 local persons, are entitled to a self employment permit and
employment permits for up to five (5) expatriates.
FACILITATION SERVICES
Besides providing the fiscal and non-fiscal incentives the ZDA provides facilitation services to its clients. In this
regard, the ZDA facilitates registered investors to:
􀂃 Acquire land;
􀂃 Obtain water, electric power, transport, and communication services and facilities required for their
investments;
􀂃 Regularize their immigration status;
􀂃 Acquire other licenses required to operate a business in any particular sector; and
􀂃 Access any other after care assistance that may be required.
Guarantees:
􀂃 Free repatriation of profits & dividends
􀂃 Business cannot be compulsorily acquired by government, except by act of parliament in extreme
circumstances
􀂃 Protection against non-commercial risks, as Zambia is a signatory of multilateral investment guarantee
agency (MIGA and Africa trade Insurance Agency.
􀂃 Impartial forum for resolving disputes
􀂃 Special bilateral Investor Protection Agreements exist while