ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Bwalya Milunga, Mulenga Mundashi Legal Practitioners
more than 90 days in a 12‑month period – a definition that tracks the OECD Model’s structure. However, Zambia has not incorporated the AOA into its domestic rules, and the ZRA has not issued PE‑specific profit attribution guidance comparable to the OECD’s AOA manuals. Thus, profit allocation for PEs is generally inferred from ordinary arm’s length principles and applicable double tax treaties, which typically follow Article 7 of the OECD Model. In treaty situations, Zambia applies the treaty’s profit attribution rules, which usually require that only profits attributable to the PE’s activities in Zambia may be taxed – consistent with Article 7 of the OECD Model Tax Convention. Zambia does not apply any safe harbour regime for allocating profits to PEs. 10. Relevance of the United Nations Practical Manual on Transfer Pricing 10.1 Impact of UN Practical Manual on Transfer Pricing The Transfer Pricing Regulations provide that they are to be construed in a manner consistent with the UN Practical Manual on Transfer Pricing for Developing Countries as supplemented and updated from time to time. This illustrates Zambia’s consistency with the application of transfer pricing rules in accordance with the UN Practical Manual on Transfer Pricing. The Manual essentially influences the practice of transfer pricing in domestic legislation. 11. Safe Harbours or Other Unique Rules 11.1 Transfer Pricing Safe Harbours Safe harbours are provided on the amount charged for the provision of a low value-added service between connected persons. They only apply to the mark-up applied to the cost of the services. Taxpayers will still need to establish that all other conditions of the trans - action are at arm’s length, including that:
• the services were actually provided; • the services provide economic benefit to the recipi - ent that is not incidental, duplicative or only relating to the activities of the shareholder; • the cost of the services has been calculated using an appropriate cost base; • the services have been allocated using appropriate allocation keys; • the service providers have applied the cost plus method to determine the costs; and • the mark-up on these costs is no more than 5%. 11.2 Rules on Savings Arising From Operating in the Jurisdiction Zambia does not have specific rules governing sav - ings that arise from operating in Zambia. 11.3 Unique Transfer Pricing Rules or Practices There are currently no notable unique rules or practic - es in Zambia, as the country’s Transfer Pricing Rules are highly influenced by the OECD Transfer Pricing Guidelines and are construed in a manner consistent with the Guidelines, except where there is inconsist - ency. 11.4 Financial Transactions Zambia’s transfer pricing guidance aligns with the OECD Transfer Pricing Guidelines, except where inconsistent. The conduct of parties must align with reported accounts. Financial information must be pro - vided by taxpayers, including: • annual local entity financial accounts; • allocation schedules; and • financial data for comparables. Further, financial documentation should be produced in English. 12. Co-Ordination With Customs Valuation 12.1 Co-Ordination Requirements Between Transfer Pricing and Customs Valuation The Transfer Pricing Rules do not require co-ordina - tion between transfer pricing and customs valuation;
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