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Sales Tax Alert

The Sales Tax Bill is out!

Following the presentation of the Sales Tax Bill Registration requirements

by the Minister of Finance to Parliament for the
first reading on 2 April 2019, we provide below
some of the main points to take note of in the
Sales Tax Bill. We should highlight that the Bill
may be amended further following stakeholder
engagement during the committee stage of
enacting the law.
Introduction
A supplier will be required to register for Sales
Tax once they meet the prescribed taxable
turnover threshold. Although the Bill does not
expressly state this, we understand from The
Minister’s National Budget Speech, as well as
subsequent pronouncements, that the prescribed
turnover threshold will be set at K500, 000 in
any relevant year.

The Sales Tax Bill’s main objectives are to Where the taxable supplier exceeds the
introduce a Sales Tax on the supply of goods and prescribed registration threshold, the ZRA will
services; and to repeal and replace the Value have the power to register the supplier for Sales
Added Tax Act, 1995. Tax whether the supplier has applied for
registration or not.
Scope of Sales Tax
Valuation for Sales Tax purposes
Sales Tax will be levied on the supply of any
taxable goods or services made by a taxable For purposes of determining the value on which
supplier in the course or furtherance of the Sales Tax is calculated, the Sales Tax Bill
business that takes place in Zambia. It will also provides that:
apply on the importation of goods and services
as well as the export of goods that do not meet  On importation of goods, Sales Tax will
documentation requirements yet to be apply on the value for duty purposes
For detailed information plus any duties payable (e.g., Customs
please contact:
prescribed. Sale Tax will not apply on goods and
services to be outlined in an Exemption List to be and Excise Duties were applicable).
Jyoti Mistry issued by the Minister of Finance by way of Sales Tax is applicable regardless of
jyoti.mistry@pwc.com Statutory Instrument (further details below). whether or not customs duty is payable;
Tel: +260 211 334000  On goods manufactured in Zambia,
Cell: +260 77740641 Sales Tax will apply on the higher of the
Sales Tax Rates open market price, factory cost or
Lydia Pwadura selling price;
lydia.g.pwadura@pwc.com Sales Tax will be levied on the taxable value of  On goods supplied by other suppliers,
Tel: +260 211 334000 supplies at the following rates: Sales Tax will apply on the open market
Cell: +260 963874779 value; and
Rate  On supply of services, Sales Tax will
Emmanuel Chulu Supply of goods and services in 9% apply on the value or price of the
emmanuel.e.chulu@pwc.co Zambia services provided including any
m incidental services (i.e. disbursements
Importation of goods and 16%
Tel: +260 211 334000 incurred in providing the services).
services
Cell: +260 977240282
The Bill empowers the Minister to lower the Note: Services provided without consideration
George Chitwa (that is to say for no charge) will not be subject
George.chitwa@pwc.com rates above by way of Statutory Instrument.
to Sales Tax except as the Minister prescribes by
Tel: +260 211 334000 way of Statutory Instrument.
Cell: +260 971027555 Who is required to account for Sales Tax?

 Importers of goods, manufacturers, Exemptions

George Chitwa
George.chitwa@pwc.com
Tel: +260 211 334000
Cell: +260 971027555
producers, distributors, wholesalers and
retailers; and The Minister may exempt, by way of Statutory
 Service providers and importers of Instrument, the following from Sales Tax:
services.
 Capital goods;
 Inputs;
 Designated basic and essential goods or
services;
 Designated supplies to privileged
persons; or
 Exports.
The Bill does not definite capital goods but Penalties
defines inputs as “…goods and services used or
acquired to be used by a taxable supplier in the Some of the key penalties included in the Bill are
course of furtherance of a business that takes as follows:
place in the Republic”.
Item Penalty/Fine
Compliance requirements
Failure to issue a tax Fine not exceeding
The Bill provides for a return to be submitted to invoice in prescribed 300,000 penalty
the Zambia Revenue Authority (ZRA) whether or format units (K90,000) and/
not tax is due for an accounting period (an or imprisonment
accounting period is one calendar month). Under term ≤ 3 years.
the Bill, a Sales Tax return is due for submission Failure to record Fine not exceeding
on the 18th day of the month following the end of daily supplies in 300,000 (K90,000)
the accounting period to which it relates. prescribed manner penalty units and/or
imprisonment term ≤
In addition to the above and similar to Value 3 years.
Added Tax, the Sales Tax Bill provides for Late submission of Administrative
appointment of withholding tax agents. Returns returns penalty of 2,000
from withholding tax agents are due for penalty units (K600)
submission on the 16th day of the month per month or part
following the end of the accounting period. thereof.
Late payment of tax 5% penalty of unpaid
Documentation requirements tax per month or part
thereof and interest
The Bill requires taxable suppliers to issue a tax at the Bank of
invoice for goods and services supplied in a form Zambia discount rate
specified by the Commissioner- General. plus 2%.
A tax invoice shall be required to be issued using Failure to maintain Fine not exceeding
any of the following: records for the 10 50,000 penalty units
year prescribed limit (K15,000) and/or
 An electronic fiscal device; imprisonment ≤ 6
 Accounting software or months.
 A pre-printed tax invoice book. Failure to register Fine not exceeding
once the minimum 100,000 penalty
The Bill also requires taxable suppliers to keep a requirements are met units (K30,000)
record of supplies made in a day in a manner and and/or imprisonment
format to be prescribed. Failure to adherence is ≤ 1 year.
expected to attract a fine and/or a prison term, Additionally, a
upon conviction. penalty equal to the
tax due on the
With regards to retention of documents, the Bill supplies from the
requires records to be maintained for a period of time the supplier was
10 years from the latest date to which the due for registration to
respective record relates. Further, the Bill the date of the
requires that the records be kept in Zambia, assessment.
except in cases approved by the ZRA and subject General offences Fine not exceeding
to conditions that the ZRA consider necessary. 300,000 (K90,000)
penalty units and/or
imprisonment term ≤
3 years.

In respect of tax deducted by withholding tax

agents, the Bill categorically states that late
payment penalties shall not accrue on the taxable
supplier in the event that the agent does not
remit the tax to the ZRA on time.
General offences Transitional provisions

The Bill provides for the following general offences We summarise below the transitional
that are subject to a fine not exceeding 300,000 provisions included in the Sales Tax Bill:
penalty units (K90,000) and/or imprisonment for a
period not exceeding 3 years:  A supplier registered under the VAT
Act and who meets the registration
 Knowingly or negligently providing false or requirement under the Bill will be
misleading information; required to register for Sales Tax
 Taking steps to evade or fraudulently claim  Accrued VAT credits will be
tax; refundable to taxpayers. However,
 Failure to furnish the ZRA with information prior to payment of the refunds the
within the time specified in the final Act; ZRA may offset any refundable
 Failure to maintain records or documents amounts against any outstanding tax
required under the final Act; liabilities that the taxpayer may have.
 Failure without just cause to attend at a  Records required to be kept under
time and place in accordance with the VAT Act for a specified period
requirements of a notice served; shall continue to be kept as if
 Delays, assault, obstructs, hinders an prescribed by the Bill for the
authorized officer to perform their duty; unexpired residue of the period.
 Refusal to give authorized officers  The ZRA can still conduct VAT audits
information or assistance required for an and assessments following the repeal
investigation; or of the VAT Act for periods in which
 Impersonation of authorized officers under the VAT Act was applicable.
the final Act or false representation of
oneself to an authorized officer. Effective date of commencement

Recovery of tax
 The Bill provides for the tax due but not
paid to be recoverable in any court, by an
attachment of debt, a charge on land or
under distress.
 The tax chargeable on a supply of goods or
services shall be recoverable from the
person issuing the invoice.
Please note that the Sales Tax Bill is subject to
approval by Parliament. Following which the
Minister through a statutory instrument will
indicate the effective date of the legislation.
The Minister of Finance has tentatively
indicated that Sales Tax will be effective from
1 July 2019.

About claims of tax credits for overpayments, the Bill

requires such claims to be made within 6 years and
in writing to the ZRA after the end of the accounting
period to which the claim relates.

This publication has been prepared as general information on matters of interest only, and does not constitute
professional advice. You should not act upon the information contained in this publication without obtaining specific
professional advice.

© 2019 PricewaterhouseCoopers Limited. All rights reserved. In this document, “PwC” refers to
PricewaterhouseCoopers Limited which is a member firm of PricewaterhouseCoopers International Limited, each
member firm of which is a separate legal entity.