SALES TAX IN ZAMBIA

PRESENTED BY DANIEL MULENGA KATONGO

MANAGING PARTNER

REEDS BUSINESS SOLUTIONS

Chartered Accountants

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WHAT IS SALES TAX?��

• consumption tax that is levied on the supply of goods and services.
• Only Businesses with an annual turnover of K500,000 and above will be required to register and charge Sales Tax.
• Sales tax will be applicable on the supply of goods in Zambia by manufacturers, producers, distributors, wholesalers and retailers.

WHICH OTHER COUNTRIES HAVE SALES TAX?

• USA,
• Canada
• Malaysia and
• Zambia

WHAT ARE THE APPLICABLE RATES OF SALES TAX?

• 16 percent Sales Tax rate will only apply on imported goods and services;
• 9 percent Sales Tax will be charged on goods and services supplied locally;
• No Sales Tax will apply on imported or locally sourced inputs into production that are on the exemption list.

WHAT ITEMS ARE EXEMPTED UNDER SALES TAX?

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• Most inputs into production in priority sectors identified in the 7th National Development plan (Agriculture, Manufacturing, Mining and Tourism) these sectors are vital for sustained economic growth and stability.

EXEMPTED ITEMS CONT’D

• Exemption on inputs into production, capital goods; basic and essential goods and services; supplies to designated privileged persons such as Diplomats; and Exports.
• Social protection exemptions including, but not limited to, all basic foods and essential goods and services such as:

EXEMPTED ITEMS CONT’D

• transactions for sale or lease of an interest in land other than the sale, lease or rental of commercial property
• maize,
• mealie meal,
• soya beans,
• cassava,
• bread,
• meat, e.t.c.

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WILL EXPORTS BE CHARGED SALES TAX?

• No;
• exports will be exempt from the sales tax.

WHAT WILL BE THE DUE DATES FOR SALES TAX?

• The due date for returns and payment of Sales Tax is the 18th day following the end of the accounting period/month.
• The due date for the returns and payment for Withholding Sales Tax is the 16th day following the end of the accounting period/month.

SALES TAX DUE DATES CONT’D

• Taxable Suppliers who submit their Sales Tax or Withholding Sales Tax returns after the due date will be charged penalties. Further, failure to pay the tax by the due date will also attract penalties.

WHAT ARE MECHANISMS IMPLEMENTED TO SAFEGUARD SALES TAX TRANSACTIONS?

• The Sales tax system will provide various control mechanisms such as electronic fiscal devices, inbuilt credibility checks, data matching tools to ensure that taxpayers provide complete and accurate information including returns.
• Most importantly, all registered Sales Tax suppliers will be required to issue a tax invoice.

WILL THE SALES TAX INCLUDE THE MINIMUM TAXABLE VALUE ITEMS?

• No.
• There will be no minimum taxable values under sales tax. The withholding sales tax mechanism will address the potential leakage associated with the informal sector.

HOW WILL THE DIPLOMATS EXEMPTIONS BE ADMINISTERED?

• The sales tax will provide for a refund system for individual diplomats to effect the exemptions in accordance with reciprocity privileges availed to Zambian diplomats accredited to the sending country of those diplomats.

WILL INTENDING TRADERS BE GIVEN EXEMPTION FOR INPUTS FOR PRODUCTION AND MANUFACTURING?

• Yes.
• Intending traders will be entitled to exemptions on qualifying inputs and capital equipment for periods prescribed by the Minister.

WILL ZRA ACCEPT REGISTRATIONS TO THOSE BELOW THRESHHOLD?

• Yes,
• providers of certain services will be required to be registered for Sales Tax regardless of whether they meet the registration threshold or not.
• The Minister will by statutory order prescribe the categories of suppliers that will be required to be registered regardless of turnover.

WILL ONE OFF TRANSACTION BE USED TO DETERMINE THE THRESHOLD?

• No.
• One off transactions will not be included in the turnover for determining the registration threshold.
• The supplies that will be included in the turnover for determining the registration threshold will only include supplies made in the course of or furtherance of the business.

HOW WILL THE TRANSITION FROM TOT TO GST BE CONDUCTED?

• Taxpayers on Turnover Tax who meet the Sales Tax threshold will automatically be migrated to Income Tax but the Turnover Tax account for such taxpayers will only be deregistered after filing all the outstanding returns and paying any tax due.

THE TRANSITION FROM VAT TO SALES TAX.

• VAT transactions are expected to be completed 3 months into the implementation of the Sales tax in accordance with the provisions of the Sales Tax Act. There will be no further claims or returns after this period. A final return will be filed for VAT to conclude all the VAT transactions at the close of the prescribed accounting period.

WHAT ARE THE DIFFERENCES BETWEEN VAT AND SALES TAX?

• The fundamental difference between Sales tax and VAT is that, VAT is imposed on the value added to the good or service at a particular supply point, while the Sales Tax is imposed on the selling price of the good or service.

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DIFFERENCES CONT’D

• Sales Tax is paid on the selling price at defined stages in the supply chain. Registered suppliers pay the Sales Tax on taxable purchases and they charge on taxable sales. They then remit the collected Sales Tax to the tax authority. There is no credit mechanism under the Sales Tax.

DIFFERENCES CONT’D

• In its operation, the VAT allows a registered entity to pay VAT on their purchases, then charge VAT on their sales and in their tax return, they compute the difference between what they charged and what they paid. The computation of this difference is what is known as the VAT credit mechanism. If this difference is positive, they remit it to tax authority but if the difference is negative then it constitutes a refund claim which the tax authority has to verify and pay.

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EFFECTS OF SALES TAX ON PROPERTY TRANSFERS.

• Sales tax is exempt on the proceeds of sale or lease of properties/ land except the transactions for sale, lease or rental of commercial property.

ANY QUESTIONS ?

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THANK YOU