ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Bwalya Milunga, Mulenga Mundashi Legal Practitioners
cases, which generally take a longer period of time to conclude compared with normal audits. Additionally, the ZRA had noted that without specific guidelines taxpayer compliance was dif - ficult to enforce regarding the need to prepare a transfer pricing policy document for the relevant group. This is in view of the fact that the ZRA, in ensuring compliance, relied on the general provi - sions in the Income Tax Act to compel taxpay - ers to submit transfer pricing documentation and information. In 2017, the Zambian government joined the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and agreed to adopt the BEPS project agreement, the country-by-country reporting measures to prevent tax treaty shop - ping, and the minimum standards that were set out by the OECD and G20 nations in 2015. In doing so, the government aimed to increase tax revenue payments and reduce the tax burden on easy-to-pay taxes by creating an atmosphere of fairness among companies that are liable for tax, which, it was hoped, would lead to voluntary compliance. In view of the foregoing, the government strengthened the Transfer Pricing Rules by amending the Transfer Pricing Regulations. Major changes were introduced in 2018 when these amendments introduced, inter alia, provi - sions relating to the arm’s length principle and preparation of transfer pricing documentation. In 2021, the requirement for country-by-country reporting was introduced, and further amend - ments were made to the Transfer Pricing Regula - tions in 2022 and 2023. In 2024, the provisions of the income tax were amended to enhance clarity and coherence in determining the timeline for submitting claims related to transfer pricing when legal proceed -
ings are involved. Section 97A(11) of the Income Tax Act outlines prerequisites for claiming credit under a Double Taxation Agreement for foreign tax, emphasising the exclusion of any foreign tax amount not meeting arm’s length conditions. It underscores that the determination of income eligible for credit should align with arm’s length conditions. Section 97(11A) imposes a time limit, stipulating that claims must be submitted within twelve months from the assessment date. The crux of the recent amendment, encapsulated in Section 97A(11B), addresses a procedural nuance, in that for cases under litigation, the date of determination or the final ruling shall be considered as the date of assessment. It states that in cases where a decision under Section 97A is under appeal or pending before a court, the date of assessment mentioned in Section 97(11A) will be deemed the date when the deci - sion on appeal is rendered, or the final court rul - ing is provided. The Transfer Pricing Rules recognise the applica - tion of the OECD Transfer Pricing Guidelines and the United 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 transactions, which are defined as transactions between associated persons. Associated per - sons include the following: • parties connected directly or indirectly through shareholding, equity or partnerships;
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