Page 14 - Zambia Yellow Pages 2025

10
investment thresholds to qualify for fiscal and non-fiscal incentives.
Category 1 fiscal incentives apply for investments of US $500 000 and
above in a multi-facility economic zone (MFEZ), an industrial park, rural
enterprise or priority sector such as manufacturing, construction and
establishment of infrastructure, energy and water development, and
water supply. As announced in the 2021 Budget, the investment
threshold for a Zambian citizen to qualify for tax incentives under the
Zambia Development Agency Act has been reduced to US $100 000
from US $500 000.
Taxation
Zambia principally operates a source-based system for the taxation of
income. Residence of a person/entity in the country widens the scope of
taxation to include interest and dividend income from abroad.
Non-Zambian resident enterprises that have a permanent
establishment in Zambia are subject to corporate income tax on
Zambian-source income. If there is no permanent establishment,
Zambian-source income may still be subject to withholding tax.
From the base rate of 35 percent corporate tax for companies and
branches, electronic communications networks or service licensees pay
40 percent on profits in excess of K250 million. Tax on income earned
from mining operations is 30 percent, and tax on income earned from
mineral processing is 35 percent. Income originating from the
production of organic fertiliser and chemical manufacture of fertilisers is
taxed at 15 percent. Farming and agro-processing is taxed at 10 percent,
as are businesses involved in the export of non-traditional products.
To resuscitate the tourism sector and promote local tourism, the
following measures were announced in the 2021 Budget:
•Reduce the corporate income tax rate to 15 percent from 35 percent on
income earned by hotels and lodges on accommodation and food
services
• Suspend import duty on safari game viewing motor vehicles, tourist
buses and coaches
•Suspend licence renewal fees paid by hotels and lodges
•Suspend the retention fees paid by tourism enterprises
•Suspend registration fees for hotel managers
Furthermore, relief is to be provided to the horticulture and floriculture
subsectors through increasing the number of years for claiming the 10
percent development allowance to five years from the existing three
years. Other recent tax incentives include the introduction of a local
content allowance for income tax purposes for utilisation of selected
local raw materials to encourage local content and value addition.
MARKETS & TRADE RELATIONS
Zambia's major export markets comprise Switzerland, China,
Democratic Republic of Congo (DRC), Singapore and South Africa, which
accounted for 88 percent of total exports in 2019, up from 78.7 percent
in 2018. Copper is the major export commodity, and makes up the
highest proportion of earnings from Switzerland, China and Singapore.
Various non-traditional exports, such as salt, sulphur, lime and cement,
inorganic chemicals and compounds of precious metals, and motor
vehicles as well as vehicle accessories, accounted for the bulk of export
earnings from the DRC and South Africa. The top source countries for
Zambia's imports are South Africa, China, United Arab Emirates, India
and the DRC.
Ports most frequently used include Durban in South Africa,
Dar-es-Salaam in Tanzania and Walvis Bay in Namibia (the shortest
route), with the route to the port of Beira in Mozambique being another
option. The upgrading and rehabilitation of road and rail routes along
the North-South Corridor, one of Africa's major trade routes, along with
other regional infrastructure plans and the completion of the Kazungula
Bridge between Zambia and Botswana, are helping to reduce the time
and costs of surface transport and open up new business opportunities
in Tanzania, the DRC, Malawi, Botswana, Zimbabwe, Mozambique and
South Africa.
Zambia continues to pursue a liberal trade policy, both regionally and
internationally. The emphasis is on adding value to locally produced
goods for increased domestic and foreign market earnings, and
developing hard and soft infrastructure such as roads, e-commerce and
border facilities. The aim is to achieve an export-driven, competitive and
viable trade and commerce sector by 2030, while increasing the
contribution of exports to GDP to 40 percent.
The US Agency for International Development (USAID) Southern Africa
Trade and Development Hub is partnering with Government to bolster
bilateral and intraregional trade by modernising Zambia's trading
systems and implementing WTO Trade Facilitation Agreement
protocols. Furthermore, Zambia has launched its Export Diversification
Strategy in Gold and Gemstone Mining, which aims to guide the
formalisation of the sector and stop illegal trading of these
commodities. It was developed with support from the European Union
through the COMESA Regional Integration Capacity Project (RICB) as
well as other cooperating partners through the Enhanced Integrated
Framework (El F) and the TradeCom II Projects.
Trade agreements are essential for accelerating economic growth and
diversification by increasing non-copper exports. Zambia is a member of
the Southern African Development Community (SADC), a grouping
of 15 countries with a combined population of more than 345.2 million
and a cumulative GDP of US $721.321 billion. The SADC Free Trade Area
(FTA) has been fully implemented since 2012, with 92 percent of product
lines traded at zero percent.
The Common Market for Eastern and Southern Africa (COMESA), which
has its headquarters in Lusaka, promotes regional economic integration
through trade and investment. The COMESA FTA came into being in the
year 2000, with the launch of a Customs Union in 2009 deepening
integration in the region through harmonised policies regarding
external tariffs, classification and regulations. COMESA's 21 member
states have a population of over 540 million people and a global trade in
goods worth US $235 billion, making it a major marketplace for both
internal and external trade. The EU is COMESA's main trading partner.
Zambia signed the Tripartite Free Trade Area (TFTA) Agreement between
COMESA, SADC and the East African Community (EAC) in June 2016. The
agreement aims to establish a single market for around 700 million
people across 27 African countries with a combined GDP of more than
US $1.4 trillion.
The TFTA serves as a building block for the African Continental Free
Trade Agreement (AfCFTA) which envisages bringing together all 55
member countries of the African Union to trade tariff-free. Zambia is
among 54 African countries to have signed the agreement, which aims
to create a market of over 1.2 billion people with an aggregate GDP of
close to US $4 trillion. The AfCFTA was officially launched at the 12th
Extraordinary Summit of the African Union in Niamey, Niger, in July
2019. Some 30 countries have now ratified the agreement, which
needed 24 ratifications to enter into force, and its implementation
began on 1 January 2021. While Zambia is yet to ratify, a national
implementation strategy is in place and multi-stakehollder
engagements are ongoing.
Zambia is also eligible for trade benefits under the US's African Growth
and Opportunity Act (AGOA), which facilitates both higher levels of
trade and investment in support of positive economic and political
developments in the region and encourages reciprocal trade and
investment in Africa.The AGOA Extension and Enhancement Act of 2015
extends AGOA for ten years (until 2025), and includes an extension of
third-country fabric provisions in order to nurture the development of