ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Bwalya Milunga, Mulenga Mundashi Legal Practitioners
• the availability of reliable information needed to apply the selected transfer pricing method or other transfer pricing methods; and • the degree of comparability between controlled and uncontrolled transactions, including the reli - ability of comparability adjustments, if any, that may be required to eliminate differences between them. The rules provide that where the comparable uncon - trolled price method and the other listed transfer pric - ing methods can be applied with equal reliability, the tax authorities would choose the comparable uncon - trolled price method. Further, where the comparable uncontrolled price method, the resale price method, the cost plus method, the transactional net margin method and the transactional profit split method can be applied with equal reliability, the tax authorities would choose either the comparable uncontrolled price method, the resale price method or the cost plus method. 3.4 Ranges and Statistical Measures The Transfer Pricing Rules provide for the arm’s length range, which is defined as a range of relevant finan - cial indicator figures including prices, margins or profit shares produced by the application of the most appro - priate transfer pricing method to a number of uncon - trolled transactions, each of which is relatively equally comparable to the controlled transaction based on comparability analysis (though in some cases not all examined comparable transactions will have a rela - tively equal degree of comparability). Further, the regulations provide for the interquartile range, which is used to enhance the reliability of the analysis where the range includes a sizeable number of observations, and the taxpayer has made reason - able efforts to exclude points of lesser degree of com - parability. 3.5 Comparability Adjustments There is no express requirement for comparability adjustments. However, when picking the most appro - priate transfer pricing method, the tax authorities con - sider the degree of comparability between controlled and uncontrolled transactions, including the reliability of comparability adjustments.
It is worth noting that the tax authorities may adjust the taxpayers’ results where the results fall outside the arm’s length range.
4. Intangibles 4.1 Notable Rules
Zambia’s Transfer Pricing Rules define “intangible property” as including any property which is not a physical or financial asset, and is capable of being owned or controlled for use in commercial activities. This includes the following: • patent; • invention; • secret formula or process;
• design; • model; • plan; • trade mark; • know-how; or • marketing intangible.
For transactions that involve intangible property such as licences and sales, the determination of the arm’s length conditions for controlled transactions between associated parties takes into account both the per - spective of the transferor of the property and the perspective of the transferee. Such transactions also take into account the pricing at which a comparable independent enterprise would be willing to transfer the property and the value and usefulness of the intangi - ble property to the transferee in its business. In transactions involving the licensing, sale or transfer of intangible property, a person is required to con - sider special factors relevant to the comparability of the controlled and uncontrolled transactions, includ - ing the following: • the expected benefits from the intangible property; • any geographic limitations on the exercise of rights to the intangible property; • the commercial alternatives otherwise available to the acquirer or licensee derived from the intangible property;
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