However, this will not apply after the stated periods have elapsed unless trading activities have commenced and the supplier is making taxable supplies.
Imported goods are subject to import VAT at 16% if these goods are standard rated. Some capital goods qualify for VAT deferment. Such goods will be standard rated, but VAT-registered suppliers will not pay any import VAT on importation of these specified capital goods.
It would be beneficial for local recipients of imported services if suppliers who are not established in Zambia but make taxable supplies in Zambia appointed a local tax agent in Zambia to account for VAT on their supplies in Zambia.
Once appointed, the fiscal representative would charge VAT on services provided by his principal, i.e. the nonresident supplier. In this instance, the recipient of the services should be able to claim the corresponding input VAT.
If the nonresident does not appoint a fiscal representative or register for VAT, the recipient of the services must account for the VAT on such services. Such VAT, referred to as ‘VAT reverse charge’, cannot be claimed as input VAT, or as a refund or creditand thus becomes a cost to the recipient of the services.
An application for the appointment of the local tax agent must be made in writing to the Commissioner-General (CG) of ZRA. Generally, the CG will only approve the appointment if the local representative is an independent third party. Once appointed, the fiscal representative will take on the responsibilities and liabilities for paying
the taxes due and complying with all the filing requirements on transactions undertaken by the principal in Zambia.
A foreign supplier who appoints a tax agent does not have to open a bank account in Zambia. A bank account is required only for locally registered suppliers.
The appointment of a local tax agent could place under scrutiny the operations and local tax obligations of a foreign company in Zambia by the ZRA.
The export of goods from Zambia by or on behalf of a taxable supplier and the supply of ancillary services, which are provided at the port of exportation of the goods, are zero rated (0%).
Only services that are physically rendered outside Zambia are zero rated. However, the supply of ancillary services that are provided at the port of exportation of goods may be zero rated. The supply of freight transport services, which are directly linked to the transit of goods through Zambia to destinations outside Zambia, will also be zero rated.
Refunds to foreigners
The VAT system allows special tax refunds to tourists and commercial exporters. However, refunds are only made if the purchase is made from suppliers under the approved scheme.
A refund mechanism exists for nonresident businesses (on a business visit to Zambia). If a nonresident business is not registered and has not appointed a fiscal representative, a refund payment may be made under the Commercial Exporters Refund Scheme in respect of goods supplied.
A nonregistered nonresident business that purchases goods from VAT-registered suppliers who are participants in the Commercial Exporters Scheme can obtain a refund on these goods if these are purchased for resale outside Zambia. The refund should be made within six weeks and is sent to the exporter’s destination.
Participants in the Commercial Exporters Scheme will issue the nonresident business a commercial export tax invoice form (VAT 283) and a commercial export authorisation form (VAT 284). At the port of exit, a copy of each form will be left with the Customs officials for verification.
Nonresident businesses that have appointed a fiscal representative may make a claim for input VAT up to one year from the date of the invoice. Refunds should be made by the ZRA within 30 days of the submission of the claim, but as this may be subject to verification by the ZRA, the claim may be delayed.
Place, time and value of supply
Place of supply
The place of supply is the location of the goods when supplied to a customer. If goods are in Zambia when a supplier allocates them, the supply is in Zambia. Goods are considered supplied in Zambia if their supply involves their installation or assembly at a place in Zambia.
The place of supply of services is deemed to be in Zambia if the supplier has a place of business in Zambia, the supplier’s usual place of residence is in Zambia, or the service is imported.
In these instances, services are considered as supplied in Zambia and will therefore be subject to 16% VAT.