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Zambia Delays VAT Again, Until September

by Lorys Charalambous, Tax-News.com, Cyprus

05 July 2019


Zambia has once again pushed back implementation of a sales tax in place of value-added tax, to September 1, 2019.

The Government said it was not ready to implement the regime on July 1, 2019.

The regime was intended to be in place from April but was delayed to allow for more time for consultations with taxpayers and other stakeholders.

The tax agency released guidance on the new regime in the form of FAQs on May 3, 2019.

The FAQs confirm the following details of the regime:

Registration obligations

Businesses with an annual turnover of K500,000 (USD39,000) will be obligated to register and charge sales tax. One-off transactions will not be included in turnover for the purposes of determining whether a business should register.

Providers of certain services will be required to be registered for sales tax regardless of whether they meet the registration threshold or not. The Minister of Finance will by statutory order prescribe the categories of suppliers that will be required to be registered regardless of turnover.

Rates

The regime will feature two rates:

  • A 16 percent sales tax rate will apply on imported goods and services;
  • A 9 percent rate will be charged on goods and services supplied by domestic businesses.

Exemptions

The following goods and services will be exempt:

  • Inputs used in production and capital goods;
  • Supplies to designated privileged persons such as diplomats;
  • Exports; and
  • "Basic and essential" goods, such as:
    • maize;
    • soya beans;
    • cassava;
    • bread;
    • eggs;
    • poultry, livestock, and fish.

The following will also be exempt:

  • health services and related supplies;
  • education services;
  • water supply services;
  • transactions for the sale or lease of an interest in land, other than the sale, lease, or rental of commercial property.

VAT refunds

The Government says it will honor legitimate refund claims. It said: "During the transitional period between VAT and sales tax, tax account reconciliations will be undertaken to close off VAT and a plan will be put in place of how to liquidate the legitimate refunds."

"VAT transactions are expected to be completed three months into the implementation of the sales tax in accordance with the provisions of the Sales Tax Act. There will be no further claims or returns after this period. A final return will be filed for VAT to conclude all the VAT transactions at the close of the prescribed accounting period."

"The final return will not be allowed on the system where the taxable supplier has missing returns," it said.

Filing obligations

The due date for returns and payment of sales tax will be the 18th day following the end of the accounting period, while the due date for the returns and payment for withholding sales tax will be the 16th day following the end of the accounting period.

Taxable suppliers who submit their sales tax or withholding sales tax returns after the due date will be charged penalties. Further, failure to pay the tax by the due date will also attract penalties, the tax agency said.

TAGS: Finance | tax | business | sales tax | mining | interest | accounting | education | Zambia | penalties | services | VAT refunds | Providers | Tax

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