Zambia

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.

Navigation

Key provisions applicable to VAT on ESS
Services in scope
Registration and compliance
Invoicing
VAT on costs
Other considerations

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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:

streaming services including films, television shows, music, games, sporting, political, cultural, artistic, scientific and entertainment events, video on demand and podcasts
software services, including software drivers, website filters, firewalls, virtual private network services, banner blockers and the provision of after sale services at a consideration, software updates, software version upgrades and other software support services
downloadable digital content including computer and mobile applications, electronic books, films, television shows, music, games, podcasts, images and text
website related services, including website supply, web hosting, remote maintenance of programmes and equipment
subscription based media including news services, magazines, weather or travel reports and virtual playgrounds
search engines and automated help desk service, including customisable search engine services
electronic data management services, including online warehousing, file sharing and cloud storage services
online presence services, including advertising services and services providing or supporting a business or personal presence on an electronic network such as a website or a webpage
ticketing services for events, theatres, restaurants and similar services
online market services linking the supplier to the customer including the right to put goods or services up for sale on an online market
data monetisation including sales, licensing or any other form of monetising data generated from a user’s activities

The list above is not exhaustive. The examples are provided as a guide.

Further, Regulation 3(2) exempts the following supplies:

broadcasting and telecommunication services
physical media including read only memory compact disk, floppy disks and similar tangible media
physical audio or video media including compact disks, audio cassettes, video cassettes and digital video disks
physical game media such as games on a read only memory compact disk
professional services such as advice given by lawyers and financial consultants to clients by electronic mail

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.

Download publication (pdf - 4.20mb) VAT in Africa Digital Services

This report is a special edition of our annual VAT Guide in Africa, focusing on new rules and measures that have been introduced to tax the digital economy unilaterally by countries in Africa.

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