ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Diana Chisale, Mulenga Mundashi Legal Practitioners
7. Anti-Avoidance Provisions 7.1 Overarching Provisions
transactions. Taxpayers are required to select the most appropriate method for their specific transac - tions. • In line with BEPS, Action 13, Zambia has imple - mented CbCR requirements, mandating multina - tional enterprises to report income, profits, taxes paid and economic activity indicators for each jurisdiction in which they operate. • The government has enhanced laws to prevent tax treaty abuse, profit shifting through excessive deductions, and avoidance of permanent estab - lishment status. This includes renegotiating tax treaties to incorporate anti-abuse provisions. • Efforts have been made to rationalise tax incen - tives and scale down tax holidays to prevent base erosion through the misuse of such incentives. • Zambia has committed to improving the Mutual Agreement Procedure (MAP) to resolve tax treaty- related disputes effectively, as part of its adherence to BEPS, Action 14. 9.2 Government Policy and Objectives Approach In December 2017, Zambia joined the OECD/G20 Inclusive Framework on BEPS, committing to the implementation of international measures to address tax avoidance. Zambia has continued to enhance its compliance with BEPS actions, including measures such as country-by-country reporting and tackling tax treaty abuse. The Zambian government aims to boost tax revenue and reduce the disproportionate tax burden on easily collectible taxes, fostering a fair and compliant tax environment. This approach is evident in the contin - ued updates to the Transfer Pricing Regulations, align - ing them with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. With respect to Pillar One, Zambia supports the real - location of taxing rights to market jurisdictions, espe - cially for taxing profits of multinational enterprises (MNEs) operating within the country. Services pro - vided by digital MNEs are widespread in Zambia, and taxing these companies would significantly increase domestic tax revenue. Discussions on legislative frameworks for implementing Pillar One are underway. Zambia is in the process of evaluating the Multilateral
There are overarching anti-avoidance provisions, under which the Commissioner-General of the Zam - bia Revenue Authority may – if there are reasonable grounds to believe that the main purpose or one of the main purposes of any transaction was the avoid - ance of, or reduction of liability for, tax for any charge year, or that the main benefit that might have been expected to accrue from the transaction within the three years immediately following the completion thereof was the avoidance or reduction of liability for tax – direct that such adjustments shall be made as regards liability for tax as the Commissioner-General considers appropriate to counteract the avoidance or reduction of liability for tax that would otherwise be effected by the transaction, if determined to be just and reasonable. 8. Audit Cycles 8.1 Regular Routine Audit Cycle The routine audit cycles of the Zambia Revenue Authority involve: • investigations; and • routine audits, usually covering a period of up to six years. 9. BEPS 9.1 Adoption of BEPS Recommendations Zambia has made significant strides in implementing the OECD’s Base Erosion and Profit Shifting (BEPS) recommendations to enhance its tax framework and combat tax avoidance. The following measures have been adopted. • The Zambia Revenue Authority has created a dedicated unit to oversee transfer pricing issues, bolstering its capacity in international taxation. • Zambia has introduced comprehensive transfer pricing regulations, aligning with BEPS, Actions 8–10. These regulations outline the five approved methods for determining the arm’s length nature of
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