Zambia introduces Significant changes in VAT Legislation

The Zambia Ministry of Finance brought changes to the Value-Added Tax (VAT) Act aiming at increased tax revenue as part of new tax reforms. The VAT Order 2019 sets out changes for zero rate VAT applicable to capital equipment and machinery for the mining sector and copper cathodes.

The amended Order has introduced certain new groups of items to be included under the zero-rated category. The items include copper cathodes under group 10 (Minerals) and group 11 (Capital Equipment). The amended Order also has a schedule specifying the list of equipment and machinery which are to be zero-rated when it is being provided to the taxable suppliers who carry out mining operations.

Amendments:

• Liquefied Petroleum Gas (LPG) and appliances which use gas fuel are zero-rated [Group 7 – Energy Saving Appliances, Machinery, and Equipment]
• Removal of ancillary services directly linked with the transportation of goods through Zambia to make the services standard rated [Group 1 – Export of goods]

The VAT (General) (Amendment) Regulations 2019 has removed the refund claims on consumable and spare parts unless they are stock in trade. The claim of input VAT on diesel is limited to 90% and electricity to 80% which was previously 100%.

The amendments were issued on 31 December 2019 by the ministry and were effective from 1 January 2020.