VAT was introduced in Zambia on 1 July 1995 to replace the manufacturing and retail sales tax. VAT is invoice-based and is levied under the VAT Act of 1995.
exceeding ten thousand penalty units (a penalty unit is currently ZMK180, and therefore the current fine is ZMK1.8 million, which is approximately US$350), or to imprisonment for a term not exceeding 12 months.
The VAT authority is the Zambia Revenue Authority (ZRA). The Commissioner of Domestic Taxes, based at the ZRA Headquarters in Lusaka, is responsible for the administration of the VAT Act, together with the other taxes.
Rates and scope
Suppliers whose taxable turnover does not meet the statutory requirement, but who wish to be registered for VAT, may do so on a voluntary basis. Suppliers registered on a voluntary basis will have the same obligations to abide by the rules that apply to statutorily registered suppliers.
The supply of goods and services (other than those that are exempt and zero rated) are subject to VAT at the standard rate of 16%.
VAT is levied on taxable goods and services supplied by VAT-registered suppliers in the course or furtherance of a business that takes place in Zambia. It also applies to imported goods and services.
The period of voluntary registration has been restricted to 12 months and any request for renewal will be scrutinised.
Group or branch registration
The VAT Act provides for two or more companies incorporated in Zambia to form a recognised group and apply for group registration. For a group registration to be recognised by the ZRA the following conditions should be met:
one of the group members controls
each of the others;
one person, whether a company or an individual controls them all; or
Suppliers making taxable supplies with a taxable turnover of up to ZMK200 million in any 12 consecutive months or ZMK50 million in any three consecutive months or whose taxable turnover is expected to exceed either ZMK200 million or ZMK50 million in the subsequent 12 months or three months, respectively, must make an application for VAT registration.
two or more individuals carrying on a business partnership controls them all.
If the ZRA recognises the group, a single VAT registration number is allocated. Any supply of goods or services by a member of the group to another member of the group shall not constitute a supply for VAT purposes (no VAT is required to be accounted for on inter-group transactions).
A supplier who is required to apply for VAT registration and who fails to do so within a month after becoming liable to apply shall be liable to a fine not
In practice, separate branches can opt for a separate VAT registration number if necessary.
Application for registration
Application for VAT is made on a prescribed application form. The ZRA will only process a VAT application form if the supplier has applied for and been allocated a taxpayer identification number (TPIN). This requirement means that by applying for the TPIN, the supplier is registering for other taxes, such as corporate tax and ‘pay as you earn’, but these will also require separate applications.
The VAT registration number has 10 digits: 9999 999 XAB. The first seven digits are allocated consecutively. The last three digits mean the following:
‘X’ is a check digit number generated by the computer;
‘A’ denotes the region where the business is conducted; and
‘B’ denotes the type of ownership of the business.
The registration number format for resident and nonresident businesses is the same.
Cancellation of registration may take place if:
there is a change in the legal status of an entity;
the business ceases trading permanently;
the business is sold;
the business was registered as an intending business and the intention to make supplies ceases; or
the taxable supplies fall consistently below the VAT registration threshold.
All applications for deregistration should be made in writing to the Commissioner-General of the ZRA. The ZRA will normally carry out a VAT audit before approval for deregistration