Friday, October 4, 2019
Zambia announced that it will retain value-aded tax but strengthen its administration and make changes to the tax environment for mining companies in the 2020 Budget, released on September 27, 2019.
The Finance Minister, Bwalya Ng'andu, said the Government had decided to ditch its plans to replace VAT with a sales tax, as announced in the 2019 Budget, following consultations with stakeholders.
Instead, he said, the Government will improve its electronic tax administration processes and interfaces and ensure improved synergies with customs authorities to better manage VAT refund claims. Further, he said that it will become mandatory for businesses to use electronic fiscal devices.
Other changes announced include the introduction of a new requirement for businesses to report the taxpayer identification number of both buyer and seller for all business-to-business transactions, and all business-to-government transactions.
Zambia will zero rate capital equipment and machinery for the mining sector, as well as the domestic supply of copper cathodes and supplies of gas stoves, other gas cookers, and gas boilers.
It will standard rate ancillary services that are directly linked to the transit of goods through Zambia, and disallow claims of VAT on stationery, lubricants, and spare parts. This measure will not apply to retail businesses who sell these goods, the Government said.
Further, the Government said it will limit input VAT claims by mining companies on diesel to 70 percent from 90 percent, and limit input VAT claims by mining companies on electricity to 80 percent from 100 percent.
Further, the Government announced that it will reduce capital allowances for mining companies in respect of capital expenditure from 25 percent to 20 percent.
Finally, the Minister set out a number of tax enforcement initiatives. He said the Government will develop a "national policy on avoidance of double taxation agreements," with the aim of protecting the tax base, and will seek to ensure that property developers and traders pay tax.