What is Income Tax?

Income tax is charged on your profit — what is left after you subtract business costs from your sales — rather than on the sales themselves. The standard company rate is 30%.

Profit, not turnover

This is the key difference from Turnover Tax. Under income tax you deduct allowable business expenses — stock, rent, wages, transport, and so on — and pay tax on what remains.

That means a thin-margin business can pay far less under income tax than under Turnover Tax, and a high-margin one can pay more. It also means more record-keeping: you need evidence for the costs you deduct.

Example. You sell ZMW 100,000.00 and your allowable costs are ZMW 85,000.00. Your profit is ZMW 15,000.00, so income tax at 30% is ZMW 4,500.00. Turnover Tax on the same sales would have been ZMW 5,000.00.

Quarterly provisional payments

You do not wait until year end to pay. ZRA expects four provisional payments during the year, each based on your own estimate of the profit you expect to make.

First instalment — due 31 March
Second instalment — due 30 June
Third instalment — due 30 September
Fourth instalment — due 31 December

Each instalment carries a 10-day grace period, so a payment due 31 March can still be made by 10 April without penalty. Because the amounts are estimates, it is worth revising them during the year if trade turns out very different from your forecast.

The annual return

After the tax year ends you file an annual return that sets out what you actually earned. It is due by 21 June of the following year.

The return reconciles the provisional payments against the real figure. If you underpaid during the year you settle the balance; if you overpaid, the excess is credited or refunded.

Who ends up here

Businesses whose annual turnover exceeds ZMW 5,000,000.00 must leave Turnover Tax and use income tax. Some businesses are also excluded from Turnover Tax by the nature of their trade regardless of size — worth checking with ZRA if you are unsure which applies to you.

Not tax advice. This is general information to help you understand the basics. Rates, thresholds and rules change, and how they apply depends on your circumstances. Confirm the specifics with the Zambia Revenue Authority or a qualified accountant before acting on anything here.