The highly anticipated Sales Tax Bill was presented to Parliament on 2 April 2019 by Honourable Margaret Mwanakatwe, Minister of Finance. The Bill has similarities to the abolished Value Added Tax legislation with respect to administration. However, there are notable tax differences which we highlight below.
How will Sales Tax work in Zambia?
The registration requirements for Sales Tax will be prescribed by the Minister of Finance. The registration requirements are not included in the Sales Tax Bill but will be prescribed in the Sales Tax Regulations. However, preliminary indications are that the registration threshold for Sales Tax will be ZMW500,000.
Sales tax will be applicable to the following:
— The supply of goods in Zambia on manufacturers, producers, distributors, wholesalers and retailers and importers of goods; and
— The supply of services by service providers and importers of services.
An exemption Schedule will be published in due course highlighting exempt persons and supplies. The exemption schedule will include:
Capital goods;
Inputs;
Designated basic and essential goods and services;
Designated supplies to privileged persons; and
Exports.
In addition, it is important to note that Sales Tax will not be refundable.
What will the rate of tax be?
Sales tax at a rate of 9% will be applicable to goods and services supplied in Zambia. Imported goods and services will attract a sales tax at a rate of 16%.
How will it be administered?
The sales tax return will be due on the 18th following the end of the accounting period to which it relates. Payments of the respective tax will be due on the same date.
Withholding Tax Agents will be required to submit a return on the 16th day following the end of the accounting period to which it relates.
Payments of the respective tax will be due on the same date.
Taxable suppliers will be required to issue tax invoices using:
Electronic Fiscal devices;
Approved accounting software;
Pre-printed tax invoice book.
Penalties and Interest
Penalties and interest shall not accrue on a taxable supplier on the basis of tax withheld by a withholding tax agent.
What is the effective date?
Based on the Sales Tax Bill, Sales tax will be effective from 1 July 2019.
For any questions contact Michael Phiri, Partner – Tax, KPMG Zambia. mphiri@kpmg.com