Taxation table Income Tax

Standard personal income tax rates
Income band	Taxable amount	Rate
K1 to K39,600	first K39,600	0%
K39,601 to 49,200	next K9,600	25%
K49,201 to K74,400	next K25,200	30%
Over K74,400	37.5%
Income from farming for individuals
K1 to K39,600	first K39,600	0%
Over K39,600	10%
Company Income Tax rates
On income from manufacturing and other	35%
On income from farming	10%

Capital Allowances Implements, plant and machinery and commercial vehicles:

Wear and Tear Allowance	Standard wear and tear allowance	25%
Wear and tear allowance if used in manufacturing and leasing Wear and tear allowance if used in farming and agro processing	50% 100%
Non- commercial vehicles
Wear and Tear Allowance	20%
Industrial Buildings:
Wear and Tear Allowance	5%
Initial Allowance	10%
Investment Allowance	10%
Low Cost Housing	(Cost up to K20,000)
Wear and Tear Allowance	10%
Initial Allowance	10%
Commercial Buildings
Wear and Tear Allowance	2%
Farming Allowances
Development Allowance	10%
Farm Works Allowance	100%
Farm Improvement Allowance	100%

Presumptive Taxes Turnover Tax

Monthly turnover	Turnover Tax per month
K1to K4,200	3% of monthly turnover above K3,000
K4,200.01to K8,300	K225 per month+3% of monthly turnover above K4,200
K8,300.01 to K12,500	K400 per month+3% of monthly turnover above K8,300
K12,500.01 to K16,500	K575 per month+3% of monthly turnover above K12,500
K16,500.01 to K20,800	K800 per month+3% of monthly turnover above K16,500
Above K20,800	K1,025 per month+3% monthly of turnover above K20,800

Annual turnover	Turnover Tax per annum
K1to K50,400	3% of annual turnover above K36,000
K50,400.01to K99,600	K2,700 per annum+3% of annual turnover above K50,400
K99,600.01 to K150,000	K4,800 per annum +3% of annual turnover above K99,600
K150,000.01 to K198,000	K6,900 per annum+3% of annual turnover above K150,000
K198,000.01 to K249,600	K9,600 per annum+3% of annual turnover above K198,000
Above K249,600	K12,300 per annum +3% of annual of turnover above K249,600

Presumptive Tax for Transporters Seating capacity	Tax per annum	Tax per day
K	K
From 64 passengers and over	10,800	29.60
From 50 to 63 passengers	9,000	24.70
From 36 to 49 passengers	7,200	19.70
From 22 to 35 passengers	5,400	14.80
From 18 to 21 passengers	3,600	9.90
From 12 to 17 passengers	1,800	4.90
Less than 12 passengers and taxis	900	2.40
Property Transfer Tax
Value Added Tax

Rate of Tax on Realised Value of Land, Land and Buildings and shares	5%
Rate of Tax on Realised Value of Intellectual Property	5%
Rate of Tax on Realised Value on a transfer or sale of a mining right	10%

Registration threshold	K800,000
Standard Value Added Tax Rate (on VAT exclusive turnover)	16%

Customs and Excise duties on used motor vehicles

Aged 2 to 5 years	Aged over 5 years
Motor vehicles for the transport of ten or more persons, including the driver	Customs duty	Excise duty	Customs duty	Excise duty
K	K	K	K
Sitting capacity of 10 but not exceeding 14 persons including the driver	17,778	22,223	8,889	11,112
Sitting capacity exceeding 14 but not exceeding 32 persons	38,924	0	13,840	0
Sitting capacity of 33 but not exceeding 44 persons	86,497	0	19,462	0
Sitting capacity exceeding 44 persons	108,121	0	43,248	0
Aged 2 to 5 years	Aged over 5 years
Motor cars and other motor vehicles principally designed for the transport of persons including station wagons and racing cars	Customs duty	Excise duty	Customs duty	Excise duty
K	K	K	K
Sedans
cylinder capacity not exceeding 1000 cc	12,490	10,824	7,136	6,185

Cylinder capacity exceeding 1000 cc but not exceeding 1500 cc	16,058	13,917	8,564	7,422
Cylinder capacity exceeding 1500 cc but not exceeding 2500 cc	16,545	21,508	8,423	10,950
Cylinder capacity exceeding 2500 cc but not exceeding 3000 cc	18,049	23,463	10,528	13,687
Cylinder capacity exceeding 3000 cc	22,561	29,329	12,032	15,642
Hatchbacks
cylinder capacity not exceeding 1000 cc	10,705	9,278	7,136	6,185
Cylinder capacity exceeding 1000 cc but not exceeding 1500 cc	14,274	12,371	8,564	7,422
Cylinder capacity exceeding 1500 cc but not exceeding 2500 cc	15,041	19,553	8,423	10,950
Cylinder capacity exceeding 2500 cc but not exceeding 3000 cc	16,545	21,508	10,523	13,687
Cylinder capacity exceeding 3000 cc	19,553	25,419	12,032	15,642
Station wagons
cylinder capacity not exceeding 2500 cc	16,545	21,508	9,024	11,731
Cylinder capacity exceeding 2500 cc but not exceeding 3000 cc	18,049	23,463	13,357	17,598
Cylinder capacity exceeding 3000 cc but not exceeding 2500 cc	22,561	29,329	18,049	23,463
SUVs
Cylinder capacity not exceeding 2500 cc	21,057	27,374	9,024	11,732
Cylinder capacity exceeding 2500 cc but not exceeding 3000 cc	24,065	31,284	13,357	17,598
Cylinder capacity exceeding 3000 cc	28,577	37,150	18,049	23,463
Aged 2 to 5 years	Aged over 5 years
Motor vehicles for the transport of goods - with compression-ignition internal combustion piston engine (diesel or semi diesel):	Customs duty	Excise duty	Customs duty	Excise duty
K	K	K	K
Single cab
GVW exceeding 1.0 tonne but not exceeding 1.5 tonnes	21,926	9,501	8,770	3,801
GVW exceeding 1.5 tonnes but not exceeding 3.0 tonnes	26,311	11,402	15,348	6,651
GVW exceeding 3.0 tonnes but not exceeding 5.0 tonnes	30,697	13,302	17,541	7,601
Double cabs GVW exceeding 3 tonnes but not exceeding 5 tonnes	30,274	0	24,119	10,452
Double cabs GVW exceeding 3.0 tonnes but not exceeding 5.0 tonnes, with spark ignition internal combustion piston engine	30,697	13,302	24,119	10,452

Panel Vans
GVW exceeding 1.0 tonne but not exceeding 1.5 tonnes	15,348	6,651	8,770	3,801
GVW exceeding 1.5 tonnes but not exceeding 3.0 tonnes	17,541	7,601	15,348	6,651
GVW exceeding 3.0 tonnes but not exceeding 5.0 tonnes	21,926	9,501	17,541	7,601
Trucks
GVW up to 2 tonnes	21,926	9,501	10,963	4,751
GVW exceeding 2.0 tonnes but not exceeding 5.0 tonnes	28,504	12,352	13,156	5,701
GVW exceeding 5.0 tonnes but not exceeding 10.0 tonnes	24,724	18,955	10,817	8,293
GVW exceeding 10.0 tonnes but not exceeding 20.0 tonnes	30,905	23,694	11,744	9,004
GVW exceeding 20 tonnes	51,898	0	19,461	0
GVW exceeding 20 tonnes, with spark ignition internal combustion piston engine	37,086	28,432	13,907	10,662

Surtax Surtax on all motor vehicle aged more than 5 years K2,000

Introduction You are a tax assistant in a firm of chartered accountants. The firm has many clients and you are part of a team that deals with small tax payers operating in Zambia. Your Tax senior has assigned you some responsibilities relating to some clients whose information is presented in the extracts below. You should deal with each client separately. Client 1 Jacob Zuze Jacob commenced to trade on 1 September 2017 and prepared the first set of accounts for the sixteen months period ended 31 December 2018. Your firm advised Jacob to register for Value Added Tax (VAT) immediately he commenced to trade on 1 September 2017. He had bought goods for resale on 1 August 2017 for K125,000 (including VAT) and all of these goods were still available at 1 September 2017. Jacob is now interested in knowing the total amounts of income tax and VAT that were payable by him for the period of trading ended 31 December 2018.

The statement of profit or loss for the period as shown below:

Sales Revenue (excluding VAT)	1,600,000
Less:
Purchases (including goods bought on 1 August 2018)	806,200
Closing inventory	125,000
Cost of sales	(681,200)
Gross profit	918,800
Wages and salaries	235,000
Entertaining customers	119,000
Depreciation of motor vehicles	78,000
Overheads	276,080
Other revenue expenses	150,800
Total expenses	(858,880)
Net profit	59,920

The following additional information is available: (1) Turnover and expenses accrued evenly throughout the sixteen months period. 10% of the turnover consists of zero rated supplies and 20% consist of exempt supplies. The rest of the turnover consists of standard rated supplies. (2) 80% of purchases and other revenue expenses are attributed to the taxable turnover. The remaining 20% are attributed to exempt supplies. (3) Jacob had the following transactions in implements, plant and machinery during the sixteen months period:

Date	Transaction	Cost/ (proceeds)
K
1 September 2017	Bought Toyota Motor Camry Car	60,000
1 September 2017	Bought office furniture	20,300
1 February 2018	Toyota Hilux Motor Van	87,000
31 March 2018	Sold office furniture (VAT exclusive)	(18,000)
31 March 2018	Bought office equipment	43,500

(4) It has been agreed with the Commissioner General that Jacob has private use of 25% in the Toyota Camry motor car. The other revenue expenses of K150,800 shown in the statement of profit or loss include K29,000 motor car expenses relating to the Toyota Camry motor car

(5) Unless stated otherwise, all of the above figures are VAT inclusive where applicable. Client 2 Vincent Kakuwa Vincent commenced in business on 1 January 2017 trading as Kankuwa & Co. At the start of the tax year 2017, his provisional income was K515,000. He calculated and paid the provisional income tax correctly on the due dates and he also submitted the return of provisional income for the tax year 2017 correctly. At the end of the tax year 2017, Kakuwas final taxable profit was K590,000. Kakuwa calculated the balance of income tax still to be paid for the tax year 2017 and he also calculated the provisional income for the tax year 2018 at K600,000 in January 2018. As a result of unfavourable business conditions at the start of the year 2018, kakuwa revised his provisional income in February 2018, from the original amount of K600,000 to only K510,000. The unfavourable business conditions at the start of the year 2018 resulted in Kakuwa experiencing serious liquidity problems such that he paid the provisional income tax for the quarter ended 31 March 2018 and also submitted the return of provisional income for the tax year 2018 on 30 June 2018. In addition, he paid the provisional income tax for the quarter ended 30 June 2018 together with the balance of income tax for the tax year 2017 on 13 August 2018. He also submitted his self assessment income tax return for the tax year 2017 on 13 August 2018. Cash flow problems were fully resolved after 13 August 2015 and Kakuwa is certain that all the outstanding taxes thereafter would be paid properly. In September 2018, Mooya received a notice from the Commissioner General stating that his self assessment Income tax return for the tax year 2018 was the subject of a compliance check. When computing taxable income of K590,000 for the tax year 2017, it is alleged that Kakuwa deducted a non-allowable private expense of K27,600. The Commissioner General therefore raised an assessment for underpaid income tax of K10,350 in respect of the tax year 2017 and this notice was served on Mooya on 15 September 2018. No adjustment was required to the return of provisional income for the tax year 2018 as this return was subjected to the compliance check. Client 3 Jennifer Liungu Jennifer intends to commence in business on 1 January 2019. She needs to engage four workers in her business and each worker will be paid an annual salary of K48,000. Jennifer will also earn an annual salary of K72,000 from the business. Her business is expected to earn a turnover of K760,000 per annum in each of the first two years of trading. All of Jennifers sales will be zero rated supplies for VAT purposes and the business will be profitable. Jennifer will run the business from rented premises. The budgeted statement of profit or loss for the year ending 31 December 2019 is as follows:

K	K
Sales revenue	760,000
Cost of sales (equal to purchases)	(290,000)
Gross profit	470,000
Less operating expenses
Depreciation	30,000
Wages and salaries	264,000
Rent	43,500
Other revenue expenses	15,500
Total operating expenses	(353,000)
Net profit before taxation	117,000

Rent and other revenue expenses are standard rated supplies and the amounts recognized in the statement of profit or loss are inclusive of VAT. Sales revenue, cost of sales and operating expenses will accrue evenly throughout the year ending 31 December 2019.

Required: (a) Client 1

(i)	Explain why Jacob Zuze was advised to register for VAT when he commenced to
trade on 1 September 2017.	(6 marks)

(ii) Calculate the VAT paid by Jacob for each of the tax years 2017 and 2018. You MUST clearly show the amounts of output tax and the recoverable input tax for each supply for each of the two tax years. Monthly figures of VAT are NOT REQUIRED. (15 marks) (iii) Assuming that the income tax rates and bands for the tax year 2018 apply to the tax year 2017 as well, calculate the income tax paid by Jacob for each of the tax years 2017 and 2018. (20 marks) (iv) Explain how the VAT and income tax you have calculated above should have been properly paid, stating the relevant due dates and the amounts payable on each due date. (4 marks) (b) Client 2 (i) Advise Kakuwa of the amounts of penalties and interest on overdue taxes and tax returns charged on all payments and tax return submissions made up to and including 13 August 2018. (16 marks) (ii) State the possible reasons why the Commissioner General has subjected Kakuwas self assessment income tax return for the tax year 2018 to a compliance check. (6 marks) (iii) Explain the initial alternative courses of action that are open to Kakuwa following receipt of the notice of assessment showing additional income tax payable for the tax year 2017 of K10,350. (6 marks) (i) Advise kakuwa of the interest on overdue tax and penalties that he may be liable for as a result of the Commissioner Generals compliance check into his self assessment income tax return for the tax year 2017and state a possible reason why these penalties and interest may apply. (7 marks) (c) Client 3

(i)	Calculate the amount of Turnover Tax payable by Jennifer for the tax year 2019 and
explain how it will have to be properly paid.	(5 marks)
(ii)	Explain why it may be beneficial from a taxation point of view for Jennifer to register
voluntarily for VAT purposes.	(6 marks)

(iii) If Jennifer registers voluntarily for VAT, calculate: (1) The amount of VAT that she would pay and explain how it may have to be properly paid. (4 marks) (2) The amount of income tax that she would have to pay (5 marks) (Total: 100 marks)