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Zambia

  • such other documentary evidence substantiating the exportation of the goods.

Record keeping

Records must be kept for a minimum period of six years, unless the Commissioner-General advises otherwise. Records may not be kept outside the country. The records may be kept in electronic form, but hard copies must be made available for inspection purposes.

Specific VAT rules

Bad debts

The output VAT paid to the ZRA by a business, but not received from the customer, can be claimed back if the following conditions are met:

  • the claim is made on or after 27 January 1996;

  • the debt has been outstanding for 18 months or more; or

  • the debtor has been declared insolvent by a court of law.

To make a claim for relief from bad debt, a business should have:

  • made a claim to the administrator, receiver or liquidator against the debt for the VAT-inclusive amount that is owed by the insolvent debtor;

  • obtained a written statement from the administrator, receiver or liquidator to the effect that the debtor is insolvent and that the debt cannot be paid; and

  • claimed a credit for VAT remitted in respect of the bad debt by adding the bad debt relief to the input VAT incurred on domestic purchases on the VAT return.

The business is also required to maintain the following records relating to the bad debt relief:

  • copy of the tax invoice issued to the debtor in connection with the supply that later became a bad debt; and

  • evidence that the VAT being claimed as bad debt relief was remitted to the ZRA.

Land and buildings

The sale of commercial property and the sale and lease of land are exempt. Lease or rent of commercial property is taxable at the standard rate but domestic rent is exempt.

Construction of domestic and commercial buildings is taxable at the standard rate.

Leasing

The common types of leases in Zambia are finance and operating leases.

The VAT treatment under a finance lease is as follows:

  • the lessor may claim the input VAT on the purchase of the asset;

  • when the lessor leases the asset to the lessee, VAT is applied to the lease rentals/principal and other finance charges, other than interest charged on finance leases;

  • if the asset is sold at any time during or after the termination of the lease, the lessor must charge VAT on the selling price; and

  • the lessee, if registered for VAT, may claim the input VAT (output VAT charged by the lessor) but only if the claim on such assets is deductible and if the asset is for business use.

Under an operating lease, the VAT treatment is as follows:

  • the lessor may claim input VAT on the purchase of the asset;

  • when the lessor leases the asset to the lessee, VAT is applied to the lease rentals and any interest charged;

  • if the asset is sold at any time during or after the termination of the lease, the lessor must charge VAT on the selling price; and

  • the lessee, if registered for VAT, may claim the input VAT (output VAT charged by the lessor) but only if the claim on such assets is deductible and if the asset is for business use.

The lessee may also claim the input VAT charged for leasing the asset or the lease rentals payable. However, input VAT may only be claimed if the claim on these assets is allowable and the assets are used for business.

Promotional gifts

A business that provides promotional gifts where each promotional gift exceeds ZMK25,000 (approximately US$5) in value is required to account for output VAT on the open market value of the gift. This value is the price at which the gift being supplied would have been supplied in the ordinary course of business, to a person independent of the supplier.

Secondhand goods

The sale of secondhand local goods is subject to VAT. However, for saloon cars and double cabs on which input tax was expressly denied, output VAT is only charged on the profit.

Tourism industry

The supplies made by a tour operator or travel agent, licensed under the Zambia National Tourist Board, to a tourist of an inclusive tour, including accommodation, food and beverages

PricewaterhouseCoopers 175

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