NOTE: 2022 Update here; 2022 Budget Changes on Rental Income Taxation
Understanding and complying with tax obligations is crucial to avoid potential legal troubles. The Zambia Revenue Authority (ZRA) has been actively working to increase public awareness and compliance regarding various tax obligations, including the Withholding Tax on rental income. In this article, we will simplify the concept of Withholding Tax and clarify the responsibilities of tenants and property owners.
Explaining Withholding Tax: Withholding Tax, as defined by the ZRA, is not a separate tax but a method of collecting tax. It involves deducting a percentage of the total gross rental income at the time the payment becomes legally due to the recipient. In simpler terms, it is an amount that needs to be paid to the ZRA, which is 10% of the gross rental income (please verify the current rates with the ZRA).
Who is Responsible for Paying Withholding Tax? The responsibility of paying Withholding Tax lies with the tenant. The tenant is expected to deduct the Withholding Tax from the gross rental amount. It is essential to discuss and agree upon this arrangement in the rental lease to avoid any misunderstandings. The tenant’s obligations include:
- Registering for withholding tax and obtaining a Taxpayer Identification Number (TPIN).
- Submitting a withholding tax return within 14 days following the month of rental payment.
- Deducting and remitting the withholding tax amount within 14 days following the month of deduction.
- Providing the landlord with a copy of the payment receipt and certificate of deduction within 14 days of making the payment.
Responsibilities of the Property Owner: As the property owner, you have certain obligations related to the Withholding Tax, which include:
- Registering for income tax and obtaining a Taxpayer Identification Number (TPIN).
- Providing your TPIN to the tenant.
- Submitting a provisional tax return to the ZRA.
- Filing annual income tax returns, declaring the rental income and other income received during the year.
Incorporating Withholding Tax in Lease Agreements: To ensure clarity and compliance, it is advisable to mention the Withholding Tax in your lease agreement. If you require assistance, you can consult a ZIEA agent or reach out to the ZRA for guidance on complete compliance.
Understanding and complying with the Withholding Tax on rental income is essential for both tenants and property owners. By fulfilling their respective responsibilities, they contribute to a transparent and compliant tax system. For further assistance, consult relevant professionals or the ZRA for accurate and up-to-date information.
Next blog…we talk Property Transfer Tax (PTT)…watch this space!
