Income tax it is the employers statutory duty to deduct income tax from the pay of his employees whether or not he has been specifically told to do so by the department. In 1911 these were united to form northern rhodesia, with its capital at livingstone, near victoria falls. Zambia principally operates a sourcebased system for the taxation of income. Deloitte guide to fiscal information key economies in africa 2018. Tax and the ceassation of employment, tax and retrenchment, tax and retirement, tax and medical grounds, tax and salaries and more on mywage zambia. Under the income tax act, zambia has a sourcebased system for the taxation of income. Piyush goyal announced that the existing taxfree gratuity limit will be increased to.
Taxation programme zambia institute of chartered accountants. An employee can receive a gratuity amount higher than rs. Gratuity is one of the least understood components of salary. Application for tpin and tax registration amendment in registration details complete this form in block letters in case of amendment tick the boxes on the top left corner of each detail that apply in order to indicate all items. The rates of income tax applicable to an individual for the 2020 charge year are as follows.
Considering this new payment of gratuity amendment bill, let us see the new rules, eligibility, the. Economy and globalization in zambia at the time of independence, zambia was expected to become of the wealthiest nations in africa. The debt, aid and trade dat programme of jctr commissioned the study to comprehend the taxation system in zambia with the aim of forming knowledgeable and evidence based opinions on how it affects social justice. The latest amendment bill increased the new limit of gratuity to rs. Zambia principally operates a sourced based system of taxation and accordingly, any income which is deemed to be from a source within zambia will be subject to tax in zambia. The taxes which are the subject of the present agreement are. Bank of zambia, central statistics organisation source. Gratuity paid is taxed at the graduated rates of tax, as follows a qualifying. Gratuity gratuity paid into retirement schemes registered by the commissioner subject to limit of kshs. Unless otherwise indicated, the fiscal information is current as at february 2018. Mar 26, 2018 gratuity amount depends upon the tenure of service and last drawn salary. By and large, most taxation work in zambia is undertaken by accountants.
Gratuity eligibility rules, calculation and income tax benefits. Bank of zambia and central statistics office source. The personal income tax rate in zambia stands at 37. Details of each countrys income tax, vat or sales tax, and other significant taxes are set out in the publication. This move will surely benefit those employees who have just started their careers and stay in the organization for more than 5 years. But there are certain rules that make an employee eligible to receive gratuity before the age of retirement or superannuation. Additional pension or gratuity payable to certain retired officers reemployed 11. A contract of employment terminates in the manner stated in the contract of employment or in any other manner as stated in the employment code act, except that where an employer terminates the contract, the employer must give reasons to the employee for the termination of the employees contract of employment. In this act, unless inconsistent with the context adjusted basis, in relation to an asset, means t he basis of the asset a in the case of corporate shares, other than.
Zambia currently has approximately 22 such double taxation agreements dtas with foreign nations. Business income is generally calculated on the same basis for individuals as. This came to light at the signing ceremony of a memorandum of understanding worth 2. Any death cum retirement gratuity received by central and state govt. Basis of taxation the residence of the taxpayer plays no part in determining whether an amount is taxable or not. Napsa a key thing to bare in mind is that a proportion of. Da10 taxation learning outcomes on successful completion of d10, students should be able to. The gratuity amount depends upon the tenure of service and last drawn salary.
Zambian residents are also subject to income tax on interest and dividends from a. At that time, zambias external debt stood at usd7 billion, while its domestic debt was around usd1. An employer can pay higher than what an employee is actually eligible to receive, but the tax exempt and taxable portions will be calculated as described above. Contents of the paper this paper comprises the following main areas. Zambia statutory changes effective jan 2017 zambia statutory changes 2017 page 1 of 2 zambia statutory changes effective 1 january 2017. Where an employee has been retired early or normally, the following payments may be made. Income tax, which is generally collected through the pay as you earn system paye. Gratuity is a part of salary that is received by an employee from hisher employer in gratitude for the services offered by the employee in the company.
Gratuity amount depends upon the tenure of service and last drawn salary. In compiling this publication, member firms of the pkf network have. Increasingly, there has been demand from the market for a specialised training programme in taxation to. All public leaders in the country, including president john magufuli, will be subjected to five per cent income tax on their gratuity at the end of their tenure in office. How to calculate gratuity amount using gratuity formula in 2020. Tax on gratuity, exemption limit and calculation ay 2018. The main taxes and levies that affect employees are. Tax on gratuity, exemption limit and calculation ay 201819. Nov 12, 2018 gratuity is a defined benefit plan given by the employer to the employee for rendering services continuously for five years or more.
All profit making persons have an obligation to pay income tax on their profits. Take note that, for tax treatment reasons, for gratuity due and payable after 5th january 2016, what the zambia revenue authority has done is to. Purpose of employers guide to pay as you earn the purpose of this guide is to assist. Taxation is a specialist field which draws on law, administration and accountancy.
The amendment in the gratuity act was much anticipated to bring the parity in the taxation of gratuity between government and nongovernment employees. All cash benefits paid in form of allowances are taxable under paye, such, as education, housing. Unilateral double taxation relief part viii collection, recovery, refund and reliefs 77. For government employees, rs 10 lakh is the maximum amount. Direct taxes division or advice centres, lusaka and kitwe. The legislative framework relating to the regulation and administration of the taxation is provided for in the income tax act 1966, as amended. The income chargeable to tax is income arising from a source or within botswana or deemed to be within botswana. For detailed steps on how to install the tax files. Objections an employer disputing the imposition of a penalty or any other decision by the commissioner can lodge an objection within 30 days. However, the residence of a personentity in zambia will widen the scope of taxation to include interest and. Zambia revenue authority my tax, your tax, our destiny. Zambiainvest explains the fiscal framework in place in zambia, from corporate tax and income tax, capital gain tax, transfer pricing and thin capitalisation rules, double tax treaties in place and other taxes in zambia.
An act to provide for the taxation of incomes and matters connected therewith. At first the bsac administered its territory north of the zambezi in two parts, northeastern and northwestern rhodesia. In the recent interim budget of 2019, interim finance minister, mr. Investmentyogi explains everything about gratuity and the tax implications for you. Paper tc10 taxation is a paper that is discursive and requires computation. Economy and globalization in zambia mit opencourseware. Gratuity exemption limit for nongovernment employee covered under gratuity act us 1010ii employees of a factory, mine, oilfield, plantation, port, and railway company, shop and other establishments with 10 or more employees at any time during preceding 12 months are covered under the payment of gratuity act. This page provides zambia personal income tax rate actual values, historical data, forecast, chart, statistics, economic calendar and news. Nowadays, gratuity is paid by both the public sector and private sector employers.
Describe the principles of taxation and explain the role played by taxation in the economy identify and respond appropriately to ethical issues arising in the course of performing tax work explain the administrative procedures for direct taxes, including objections and appeals procedure calculate. Zambian residents are also subject to income tax on interest and dividends from a source outside zambia. Tax system the ministry of finance and national planning is responsible for the formulation of tax policy, in zambia and the implementing agency is the zambia revenue authority zra. The law relating to taxation of gratuity received by expatriate employee has been changed by income tax amendment acts 1999 and 2000. This article covers gratuity formula last drawn salary x years of service x 1526. Together, this brings zambias total debt burden to around usd17. Mar 23, 2018 the parliament passed the payment of gratuity amendment bill. Thus, income arising from outside botswana is generally not taxable although there are some exceptions. In case of death, disease or accident, the time limit of 5 years is not applicable. Vat rate is at 16%, with some items being exempted or zerorated. Taxable income zmw rate of income tax % up to 39,600. The refund of employees pension contribution is taxed as a lump sum payment at the rate of 10% the refunded employers pension contribution will be subjected to tax under the p. January 27, 2020 the zambia revenue authority zra is committed to working with the media in the country to enhance taxpayer education.
Income tax is tax on profits made by limited companies, partnerships and selfemployed individuals as well as on emoluments earned by employees. Gratuities and allowances, cash benefits and commissions. Mar 03, 2016 take note that, for tax treatment reasons, for gratuity due and payable after 5th january 2016, what the zambia revenue authority has done is to extend the amendment to the constitution on the tax. The constitution of zambiaunder the paye systemmandates employers to deduct gross payments using the following variables. With access to raw materials such as copper and land, zambia seemed to have all it needed to succeed in the global economy. In zambia, income taxes are the major sources of revenue followed by consumption taxes domestic vat, import vat and excise duty and trade taxes customs duty. Gratuity is a benefit received by an employee for services. Retirement resignation termination death gratuity is payable only to persons who have been employed for 5 years or more with the employer. Gratuity is a defined benefit plan and is one of the many retirement benefits offered by the employer to the employee upon leaving hisher job. Nonqualifying gratuity is added to the salary for the month in which it is paid and taxed with reference to the appropriate p. Gratuity is a sum of money paid by an employer to the employee. Under the pension reform act 2004, the only groups of workers who have unequivocal entitlement to gratuity are the groups exempted from the act. Gratuity in zambia should be given on the performance of a president for a given periodnow, our president has not even performed well in terms of governance which is one of his key. Generally, accruals of capital nature escape taxation although.
An employee who stops work may be entitled to the following categories of payments. Payments made to nonresidents are also subject to withholding tax at 20 percent in all cases except where there is a double taxation agreement in effect zambia also charges indirect taxes. Apportionment of gratuities and compensation for loss of office. Guide to fiscal information key economies in africa 2018. Gratuity new limit, eligibility, formula, taxation and. According to helpline law, an employee is any person other than an apprentice employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semiskilled, or. Pkf worldwide tax guide 20 iii preface preface the pkf worldwide tax guide 20 wwtg is an annual publication that provides an overview of the taxation and business regulation regimes of the worlds most significant trading countries. Agreement between the government of the union of south africa and the government of the federation of rhodesia and nyasaland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income article i 1. Gratuity refers to the money received by an employee from his employer at the time of.
The parliament passed the payment of gratuity amendment bill. Income deemed to be from a zambian source is generally subject to zambian income tax. It is a monetary benefit usually given at the time of retirement. Bank plc v zambia union of financial institutions and allied workers judgment no 12 of 2007 held that s26b of the employment act does not apply to written contracts on the basis that in enacting this provision parliament intended to safeguard the interests of employees who are employed.
However, the residence of a personentity in zambia will widen the scope of taxation to include interest and dividend income from abroad. Da10taxation zambia institute of chartered accountants. As a result the exam has both narrative and computational questions. The income tax act chapter 323 of the laws of zambia is the legislation that governs the taxation of income in zambia. The economic statistics have been obtained from the best information available during march 2018. Pension is a periodic payment, normally on monthly basis for life, until the changes made in the pension reform act, 2004. Dec 20, 2017 the maximum amount of gratuity a government employee can receive is rs 20 lakh, whereas there is no restriction on the amount of gratuity a nongovernment employee can receive. Gratuity payment liability of the employer tends to rise with an increase in the salary and tenure of employment. Once you complete 5 years in an organisation, you become eligible to receive gratuity, which a sum paid to you on. The pkf worldwide tax guide 20 wwtg is an annual publication that provides an overview of the taxation and business regulation regimes of the worlds most significant trading countries. However, tax is a complex and diverse field requiring specialised technical knowledge. The amendment raises the exemption limit of terminal. Where an employee has been dismissed or resigns, he may receive the following payments. What is gratuity how to calculate gratuity how to calculate.
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