Understanding Withholding Tax (WHT) in Zambia

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Residents vs. Non-Residents

Residents typically face lower rates (often 15%) and may claim credits for withheld amounts against their annual tax liability in non-final cases. Non-residents are subject to higher rates (usually 20%) as a final tax, reflecting Zambia's aim to tax foreign-sourced income efficiently. Double taxation agreements (DTAs) can reduce these rates for non-residents from treaty countries. For example, under the Zambia-China DTA, dividends may be taxed at 5%, interest at 10%, and royalties at 5%. Claiming treaty benefits requires advance clearance from the ZRA.

Zambia has DTAs with over 20 countries, including Botswana, Canada, China, India, Japan, South Africa, and the UK. These treaties often cap WHT on dividends at 5-15%, interest at 10-15%, and royalties at 5-15%, depending on ownership thresholds (e.g., 10-25% shareholding for reduced dividend rates).

Obligations and Compliance

Payers act as withholding agents and must:

• Deduct WHT at the time of payment or accrual.

• File returns and remit the tax by the 14th day of the following month.

• Issue certificates to recipients for creditable amounts.

As of 2025, withheld taxes must be remitted at least two days before the due date, with penalties for non-compliance. Non-adherence can result in fines, interest, or legal action. Recipients should include creditable WHT in their annual income tax returns where applicable.

Businesses and individuals should register with the ZRA, maintain records, and seek professional advice for complex scenarios, especially involving DTAs or exemptions.

Recent Changes and Outlook

In 2025, several updates were introduced via the Income Tax (Amendment) Act No. 10 of 2025:

• WHT on interest from government securities increased to 20%.

• Exemption certificates for royalties became available.

• WHT on betting and lottery winnings reduced to 15%.

• Stricter remittance timelines for withholding agents.

These changes aim to boost revenue while providing relief in targeted areas. As Zambia's economy evolves, further reforms may occur, so staying updated via the ZRA website or tax advisors is recommended.

In summary, WHT plays a crucial role in Zambia's fiscal framework, promoting fairness and efficiency. By understanding its rules, businesses and individuals can ensure compliance and optimize their tax positions. For personalized guidance, consult the ZRA or a qualified tax professional.

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