ZAMBIA REVENUE AUTHORITY LAW ASSOCIATION OF ZAMBIA 2016 AGM, LIVINGSTONE Zambia Revenue Authority Presentation by Joseph Nonde Director Design & Monitoring Domestic Taxes Division 1

Presentation Outline What is Withholding Tax (WHT)What is Withholding Tax (WHT) What payments are subject to WHTWhat payments are subject to WHT Local Management & Consultancy FeesLocal Management & Consultancy Fees Other Withholding tax ratesOther Withholding tax rates Disclosure of informationDisclosure of information ConclusionConclusion 2

What is Withholding Tax? Withholding Tax is not a tax per-se but a means of collecting tax from a payment by the person who is liable to make payment(the Payer) at the point in time the person to whom it is due to be made (the payee) becomes legally entitled to it (date of accrual). 3

Payments subject to Withholding Tax InterestInterest DividendsDividends Payments to Non Resident ContractorsPayments to Non Resident Contractors RoyaltiesRoyalties Rent Commission Consultancy/Management fees (Deduction of tax from certain payments is covered under section 82A of the Income Tax Act- Cap 323 of the Laws of Zambia) 4

Local Management and Consultancy fees Effective 1 st January 2016 Management and Consultancy fees payable to Zambian residents ( management and Consultancy fees) became subject to Withholding Tax at the rate of 15 percent ( As amended by Act no. 19 of 2015)Effective 1 st January 2016 Management and Consultancy fees payable to Zambian residents ( management and Consultancy fees) became subject to Withholding Tax at the rate of 15 percent ( As amended by Act no. 19 of 2015) "management or consultant fee" means payment in any form, other than an emolument, for or in respect of any creation, design, development, installation and maintenance of any information technology or solution, programme or system, administrative, consultative, managerial, technical or consultative or any service of a like nature; (As amended by Act No. 9 of 1978 & 4 of the 2007). 5

Fees falling under Management & Consultancy subject to WHT Legal FeesLegal Fees Accounting and Auditing FeesAccounting and Auditing Fees Architectural FeesArchitectural Fees Any other similar service’ FeesAny other similar service’ Fees 6

What this means to Lawyers & Clients This means that all persons (clients) making payments of Fees for Legal services are required to withhold 15 percent on all such payments. The only exception is when the Provider of such Legal Services holds a valid withholding tax exemption certificate. 7

Meaning Cont’d The tax deducted is not the final tax as the payee or consultant will be required to submit annual Income Tax Returns and the tax paid will be granted as a credit against any tax liability that may arise. Note: The Payee or Consultant must register for Income Tax and not Turnover Tax. Appropriate returns must be filed by the due dates 8

Due date for payment The Due Date for payment of this tax is on or before the 14 th day of the month following the month of deduction. Non observation of this obligation to withhold and pay correct tax on time results in tax penalties Penalties are computed electronically 9

Other Withholding Tax rates Royalties (residents)-15 %Royalties (residents)-15 % Royalties (non residents)-20 %Royalties (non residents)-20 % Rent (final)-10 %Rent (final)-10 % Commissions (residents)-15%Commissions (residents)-15% Commissions (non residents)-20%Commissions (non residents)-20% Management/Consultancy fees (non residents)-20%Management/Consultancy fees (non residents)-20% Note: Refer to 2016 Practice Note pages for full list on what attracts WHT and rates applicable) 10

Disclosure of Information With effect from 1 st January 2014 Commissioner General is empowered to access any type of information held by Legal Practitioners, Accountants and Financial InstitutionsWith effect from 1 st January 2014 Commissioner General is empowered to access any type of information held by Legal Practitioners, Accountants and Financial Institutions (Section 48A of the Income Tax Act) 11

Disclosure of information cont. Sec. 48A. (1) Subject to subsection (2), the provisions of this Act shall have effect notwithstanding any obligation as to secrecy or other restriction on the disclosure of information imposed under the Banking and Financial Services Act, the Evidence Bankers Books Act, the Accountants Act, 2008 and the Legal Practitioners Act in respect of information required by the Commissioner- General for the purposes of this Act. ( Income Tax Act, Cap 323 of the Laws of Zambia) 12

Exception to disclosure of information Subsection (1) does not apply to information received from, or obtained on, a client by a legal practitioner- (a) in the course of ascertaining or receiving instructions from a client; or (b) in defending or representing a client, or concerning judicial, administrative, arbitration or mediation proceedings, including advice on instituting or avoiding proceedings, whether such information is received or obtained before, during or after such proceedings. 13

Conclusion ZRA in its Corporate Strategy has put emphasis on Taxpayer Satisfaction – Surveys will be conducted especially with strategic partners so that we enhance our client relations and achieve compliance ZRA is at your service : 14