ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Diana Chisale, Mulenga Mundashi Legal Practitioners
3.4 Taxation of Individuals on Shares in Closely Held Corporations A company that declares and pays dividends will have to deduct withholding tax at a rate of 20% for non-res - idents and 15% for residents and obtain a withholding tax certificate from the Zambia Revenue Authority. The withholding tax will be treated as an advance payment by the individual shareholder to the extent that, when the aggregate income of the shareholder is calculated in the charge year after the submission of the annual tax return, the withholding tax will be treated as a credit towards the final tax liability. If an individual shareholder sells their shares in a cor - poration, property transfer tax will apply at a rate of 8% of the realised value. 3.5 Taxation of Individuals on Shares in Public Corporations Dividends on shares in publicly traded companies in Zambia are subject to withholding tax at a rate of 20% to non-residents and 15% to residents (in both cases, regarding living persons). However, the withholding tax is 0% if paid to an individual shareholder by a company listed on the Lusaka Securities Exchange irrespective of whether the individual (a living person) is a resident or non-resident. The sale of shares in publicly traded companies is not subject to any tax under the Property Transfer Tax Act. 4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes In the absence of income tax treaties, Zambian law provides for withholding tax on the following: • management and consultancy fees, at a rate of 15% for residents and 20% for non-residents; • interest, at a rate of 15% for residents and 20% for non-residents; • dividends, at a rate of 15% for residents and 20% for non-residents; • royalties, at a rate of 15% for residents and 20% for non-residents; • commissions, at a rate of 15% for residents and 20% for non-residents;
• winnings from gaming, lotteries and betting other than winnings received by an individual by virtue of employment or office, at a rate of 15% (this excludes brick and mortar casinos); • a public entertainment fee, at a rate of 20%; • a commodity royalty, at a rate of 15%; and • the distributed income of an income real estate investment trust, which is the gross rent collected by that income real estate investment minus 25% of gross collections. In the absence of income tax treaties, there are no reliefs available. Local tax authorities collect withholding tax that is deductible by reference to the date of payment or the date of accrual for the following categories or areas: • management and consultancy fees; • interest; • dividends; • royalties; • commissions; • winnings from gaming, lotteries and betting other than winnings received by an individual by virtue of employment or office; • commodity royalty; and • the distributed income of an income real estate investment trust. 4.2 Key Treaty Jurisdictions for Inbound Investment The primary tax treaty countries used by foreign inves - tors to make investments in Zambian corporate stock or debt are as follows: • the Netherlands; • the United Kingdom; • Ireland; • the Seychelles; and • South Africa. 4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices Local tax authorities do not challenge the use of treaty country entities by non-treaty country residents.
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