NOTE: 2023 UPDATE, Click here: Rental Income Tax in Zambia: A Complete Guide for Landlords
Recently the Zambia Revenue Authority (ZRA), officially announced and clarified the applicable changes to tax on rental income following the adoption of the 2022 National Budget by Parliament in late December 2021. The announcement on the 12th of January by the ZRA was followed by a number of well-planned informational sessions including a Facebook Live presentation and a Zoom webinar among others. This short article is a summary of these comprehensive informational sessions to serve as a short guide;
1. No Withholding tax on Rental Income
Effective 1st January 2022, all rental payments are to be made in full inclusive of what was previously withheld for tax purposes by tenants (or property owners as the case may have been). Tenants therefore no longer have any tax obligations on rental payments and will no longer be accountable for remitting taxes from any real estate rental transactions.
2. Register for Turnover Tax (ToT)
All rental property owners, both individuals and companies that own rental property are to register for turnover tax on rental income specifically – rental income shall be treated as separate income for this purpose. This means that regardless of your current tax bracket, i.e., below the K800,000 or above the K800,000 threshold, you will need to be registered for turnover tax (ToT) for rental income taxation.
Note: Non-compliance will attract penalties and/or court proceedings – REGISTER TODAY!
3. Declare Expected Annual Rental Income
Calculate how much total rental income you as property owner will expect to receive for the applicable tax year and declare this as you register and file your taxes on or before the 14th of February for the January rental income and on or before the 14th of subsequent months for months following.
4. Applicable Tax Rates
Annual rental income equal or below K800,000 will attract a 4% turnover tax rate and annual rental income above the K800,000 threshold will attract a 12.5% turnover tax rate. Turnover tax is payable on a monthly basis following the month in which the revenue is expected or paid. As an example, if your total monthly rental income is K66,666 you will be required to pay the ZRA a tax of K2,666 per month.
| Total rental income in January: | K66,666 |
| Turnover Tax payable by 14th February, 2022: | K66,666 x 4% = K2,666 |
If, however your total rental income is more than K66,666 per month, say K66,667 per month as an example, you will pay tax on a 12.5% rate as follows;
| Total rental income in January: | K66,667 |
| Turnover Tax payable by 14th February, 2022: | K66,667 x 12.5% = K8,333 |
5. VAT on Commercial Property
For property owners registered for value added tax (VAT), the applicable VAT tax rate of 16% (currently) will continue to apply on any commercial property on rent. This means that rent in this case will be as follows;
| Total rental income (equal or below K800,000): | K66,666 |
| VAT payable (if applicable): | K66,666 x 16% (VAT) = K10,666 |
| Turnover Tax payable by 14th of the month: | K66,666 x 4% (ToT) = K2,666 |
OR
| Total rental income (above K800,000): | K66,667 |
| VAT payable (if applicable): | K66,667 x 16% (VAT) = K10,667 |
| Turnover Tax payable by 14th of the month: | K66,667 x 12.5% (ToT) = K8,333 |
This is a short summary of changes now in effect, for further inquiries and guidance please get in touch with the ZRA directly for assistance or consult your tax accountant further. Stay tax compliant and run your rental property or properties efficiently. Need help managing your rental property? Talk to us about property management, let’s see how we can provide you service.
Disclaimer: This article should not be taken as tax advice; BCA Properties does not offer tax advisory of any kind. For further details please call ZRA call centre on 5972 or email advice@zra.org.zm.
Credit: Image by Alexandr Podvalny from Pixabay
