ZAMBIA Law and Practice Contributed by: Mulenga Chiteba, Constance Namatai Mwango and Bwalya Milunga, Mulenga Mundashi Legal Practitioners
An example of Zambia’s commitment to the OECD’s BEPS 2.0 initiatives is that while previ - ously Zambia’s tax legislation did not have spe - cific rules dealing with the digital economy and digital services, as of 1 January 2023 the gov - ernment has extended the turnover tax regime to service providers in the gig economy, which is a segment of the digital economy that involves individuals carrying out business through an online platform and under flexible or temporary conditions, and that includes an independent contractor or freelancer conducting business through an online platform. This exemplifies Zambia’s commitment to unifying approaches on taxation of the digital economy. For Zambia, the likely impact of the OECD’s BEPS 2.0 initiatives involving Pillar One and Pillar Two in the coming years is the growth of Zambia’s revenue gains. 9.5 Entities Bearing the Risk of Another Entity’s Operations The Transfer Pricing Rules do not provide for an entity to bear the risk of another entity’s opera - tions. 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 Zam - bia’s consistency with the application of transfer pricing rules in accordance with the UN Practical Manual on Transfer Pricing. The Manual essen -
tially 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 transaction are at arm’s length, including that: • the services were actually provided; • the services provide economic benefit to the recipient that is not incidental, duplicative or only relating to the activities of the share - holder; • the cost of the services has been calculated using an appropriate cost base; • the services have been allocated using appro - priate 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 savings that arise from operating in Zambia. 11.3 Unique Transfer Pricing Rules or Practices There are currently no notable unique rules or practices in Zambia, as the country’s Transfer Pricing Rules are highly influenced by the OECD Transfer Pricing Guidelines and are construed in
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