ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Diana Chisale, Mulenga Mundashi Legal Practitioners
Convention to Implement Amount A of Pillar One (the MLC) to determine its alignment with national interests and the necessary steps for domestic implementation. With respect to Pillar Two, the global minimum corpo - rate tax rate of 15% under Pillar Two is less impactful for Zambia due to its 30% corporate tax rate. How - ever, Zambia recognises the potential implications for tax competition and incentives. The government is evaluating how to adapt its tax policies to remain competitive while ensuring alignment with global standards. Implementation discussions for Pillar Two are progressing, however, Zambia has not enacted specific legislation to implement Pillar Two; the coun - try is actively monitoring global developments and the implementation status in other countries. 9.3 International Tax International tax is an issue that preoccupies the tax authorities and multinationals operating in Zambia. However, there is not much intense public scrutiny or interest that could have an influence on BEPS recom - mendations. 9.4 Competitive Tax Policy Objectives The Zambian government is under intense pressure to raise revenue to plug the fiscal deficit experienced in the recent past. On account of this, there will always be a challenge to keep marginal tax rates low, which is not consistent with a competitive tax code. Fur - thermore, because of the fiscal pressure, there is a constant review of legislation that may not create pre - dictability and certainty, which is an incentive for tax avoidance. 9.5 The Competitive Tax System There are no key features of the Zambian competitive tax system that might be more vulnerable than other areas of the tax regime. Zambia does not have state
will not have any significant impact on how the author - ity deals with hybrid instruments. 9.7 Interest Deductibility and Territorial Tax Regime Zambia has a territorial tax regime, and interest deductibility restrictions are tailored to this regime. 9.8 Controlled Foreign Corporation Reform The CFC proposals would be defective in Zambia to the extent that Zambian legislation is intended to cover Zambian income or income deemed to be Zam - bian income because it is earned by entities resident in Zambia. 9.9 Anti-Avoidance Rules The proposed double taxation convention limitation of benefit and anti-avoidance rules are not likely to have any impact in Zambia. 9.10 Transfer Pricing and IP Taxation Transfer pricing changes have not made a radical change to the Zambian tax regime. The taxation of profits from intellectual property is not a particular source of controversy in Zambia. 9.11 Country-by-Country Reporting and Transparency Provisions Zambia is currently in favour of the proposed provi - sions for transparency and country-by-country report - ing as they will help Zambian tax authorities deal with profit shifting and avoidance by local corporates affiliated to multinational enterprises. In Zambia, country-by-country reporting only applies to multina - tional enterprise groups with business entities in two or more states and an annual consolidated revenue exceeding ZMW4.795 billion during the immediately preceding accounting year. The filing requirements are applicable to Zambian tax resident entities of multinational enterprise groups for tax years ending on 31 December and each subse - quent tax year. Country-by-country reporting provides for the automatic exchange of reports among tax administrations in jurisdictions in which the multina - tional enterprise group operates.
aid rules or other similar constraints. 9.6 Hybrid Instruments and BEPS Implementation
The current provisions of the Zambian Income Tax Act have dealt with hybrid instruments and the BEPS pro - cess that has been implemented through the Transfer Pricing Regulations of 2000 as amended in 2018, 2020 and 2022. In this regard, the recommended changes
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