ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Bwalya Milunga, Mulenga Mundashi Legal Practitioners
• any joint venture owned or operated jointly with an unrelated person; • connected persons; • parties connected through direct or indirect management control and capital; or • any existing arrangements, whether in writ - ing or not, that benefit two or more entities whose conditions 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 follow - ing 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 Commissioner-General is satisfied that:
• none of the approved methods can be rea - sonably 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 inde - pendent persons engaging in comparable uncontrolled transactions under comparable circumstances. Where the taxpayer wishes to apply a different method, the taxpayer must state why the five transfer pricing methods listed in 3.1 Transfer Pricing Methods were regarded as less appro - priate or non-workable in the circumstances of the case, and the reasons why the selected method was regarded as the most appropriate for satisfying the arm’s length principle. The application to use a different transfer pric - ing method should be made in writing to the Commissioner-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 reliability of data for the compa - rability 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 pricing method, having regard to the nature of the controlled transaction, determined through an analysis of the functions undertak - en by each person in that controlled transac - tion and taking into account assets used and risks assumed;
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