ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Bwalya Milunga, Mulenga Mundashi Legal Practitioners
appeal or pending before a court, the date of assess - ment mentioned in Section 97 (11A) will be deemed the date when the decision on appeal is rendered, or the final court ruling is provided. The Transfer Pricing Rules recognise the application of the OECD Transfer Pricing Guidelines and the Unit - ed Nations Practical Manual on Transfer Pricing for Developed Countries. However, the Transfer Pricing Rules will prevail in the case of any inconsistencies. 2. Definition of Control/Related Parties 2.1 Application of Transfer Pricing Rules The Transfer Pricing Rules apply to controlled trans - actions, which are defined as transactions between associated persons. Associated persons include the following: • parties connected directly or indirectly through shareholding, equity or partnerships; • any joint venture owned or operated jointly with an unrelated person; • connected persons; • parties connected through direct or indirect man - agement control and capital; or • any existing arrangements, whether in writing or not, that benefit two or more entities whose condi - tions are deemed not to be at arm’s length. It is important to note that a party is associated with another if: • the person participates directly or indirectly in the management, control or capital of the other; or • the persons participate directly or indirectly in the management, control or capital of both of them. 3. Methods and Method Selection and Application 3.1 Transfer Pricing Methods The Transfer Pricing Rules provide for the following five transfer pricing methods that taxpayers may use: • comparable uncontrolled pricing method;
• resale pricing method; • cost plus method; • transactional net margin method; and • transactional profit split method. 3.2 Unspecified Methods
A taxpayer or the Commissioner-General of the ZRA may apply a different method, provided the Commis - sioner-General is satisfied that: • none of the approved methods can be reasonably applied to determine arm’s length conditions for the controlled transaction; and • such other method yields a result consistent with that which would be achieved by independent per - sons engaging in comparable uncontrolled trans - actions under comparable circumstances. Where the taxpayer wishes to apply a different meth - od, the taxpayer must state why the five transfer pric - ing methods listed in 3.1 Transfer Pricing Methods were regarded as less appropriate or non-workable in the circumstances of the case, and the reasons why the selected method was regarded as the most appro - priate for satisfying the arm’s length principle. The application to use a different transfer pricing method should be made in writing to the Commis - sioner-General. 3.3 Hierarchy of Methods The tax authorities have the discretion to select the most appropriate transfer pricing method from the methods listed in 3.1 Transfer Pricing Methods based on the facts and circumstances of the case and reli - ability of data for the comparability analysis. The tax authorities will consider the following: • the respective strengths and weaknesses of the methods in the circumstances of the case; • the appropriateness of the approved transfer pric - ing method, having regard to the nature of the con - trolled transaction, determined through an analysis of the functions undertaken by each person in that controlled transaction and taking into account assets used and risks assumed;
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