Overview
VAT on Cross Border Electronic Services (“CBES”) in Zambia is regulated by:
- The Value Added Tax Act, 1995,as amended (“the VAT Act”);
- The Value Added Tax (Cross Border Electronic Services) Regulations, 2024 (“VAT CBES”); and
- The Zambia Revenue Authority (ZRA) Practice Notes.
The definition of “Electronic Services” was introduced on 1 January 2020, to mean “a service capable of delivery via data across multiple electronic commerce platforms.”
The definition was subsequently amended with effect from 1 January 2024, to define Electronic Services as “...services provided or delivered on or through the internet, electronic or digital network.”
In addition, Cross Border Electronic Services has also been defined “...as electronic services supplied in the Republic by a supplier who is resident or carries on business outside the Republic.”
In this respect, a non-resident supplier of CBES who does not have a permanent business address or a registered office in Zambia is required to register for VAT under the simplified registration regime. Where the non-resident supplier is unable to register under the simplified regime, they are required to obtain the Commissioner General’s approval to appoint a person resident in Zambia to act as a local tax agent on their behalf.
The non-resident supplier once registered for VAT will be required to account for VAT on services provided or delivered to Zambian residents at the rate of 16% and issue a simplified tax invoice.
Release date: April 2024
Key provisions applicable to VAT on ESS |
| Table 1 |
Services in scope |
Regulation 3 of VAT CBES regulation provides that: ...tax shall be levied, collected and paid on the following supply of cross border electronic services:
The list above is not exhaustive. The examples are provided as a guide. Further, Regulation 3(2) exempts the following supplies:
|
Registration and compliance |
A non-resident supplier who does not have a permanent business address or a registered office in Zambia is required to register under the simplified registration regime.Upon registration, the tax authority will provide the supplier with a Taxpayer Identification Number (“TPIN”). Where the non-resident supplier is unable to register for VAT under the simplified VAT regime,they can request for approval from the Commissioner General to appoint a local tax agent. The non-resident supplier or the appointed local tax agent must submit a VAT return and make payments on or before the twenty fifth day of the month following the end of the month in which the services were rendered (prescribed accounting period). Note: The simplified registration in itself will not trigger a permanent establishment under the Income Tax Act. |
Invoicing |
A supplier of CBES who is registered under the simplified registration regime must issue a simplified invoice that contains features as determined by the Commissioner General. The invoice must be in Zambian Kwacha (ZMW) converted using the exchange rate provided by the Commissioner General as determined by the Bank of Zambia. In addition, where a tax agent is appointed, the tax agent will arrange for tax invoices to be issued on behalf of the non-resident supplier. |
VAT on costs |
| The supplier of CBES shall not claim input tax. The Input tax incurred by a recipient of the CBES shall be claimed or deducted in accordance with Section 18 of the VAT Act and the relevant regulations. A recipient of CBES shall claim input tax in Zambia Kwacha. |
Particulars |
Description |
|
Scope |
Business to Business (B2B), Business to Customer (B2C) and Business to Government (B2G) transactions | |
Liability to remit VAT |
Non-resident supplier / the “local tax agent” appointed by the non-resident supplier |
|
VAT rate |
16% |
|
Taxable value |
The VAT Act specifies that where services are supplied for monetary consideration, the taxable value is the price charged for or the open market value of the services | |
Effective date |
1 January 2024 |
|
VAT registration threshold |
The VAT threshold on ZMW 800,000 per annum is applicable. |
|
Tax invoice |
A non-resident supplier of CBES who is registered under the simplified registration regime must issue a simplified invoice that contains features determined by the tax authority. The invoice must be in Zambian Kwacha converted using the exchange rate provided by the tax authority as determined by the Bank of Zambia |
Other considerations |
| The records and accounts of a supplier of CBES may be kept at a location outside the Republic and shall be made available to the tax authority on demand. The VAT Act requires that a taxpayer maintains records for six years or such a longer period as the Commissioner General may, by notice in writing. |
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