ZAMBIA
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Vision 2030
Sixth National
Development Plan
POLICY, PLANS AND PRIORITIES
At the heart of Zambia’s strategic economic development lies the National Vision
2030 in which long-term development objectives are defined. The National Vision
is “to become a prosperous middle income country by the year 2030.” This aim is
planned to be reached by meeting several development goals, such as: (a) reaching
middle-income status; (b) significantly reducing hunger and poverty; and (c)
fostering a competitive and outward-oriented economy. Based on that, the Sixth
National Development Plan (SNDP) targets the development path for the period
2011 – 2015 under the theme: “Sustained economic growth and poverty
reduction”. Thus, the strategic focus of the SNDP is “infrastructure and human
development”.
Sectors of national
interest
Economic development since 1999 brought an unsatisfying reduction of poverty
due to growth generated mainly in urban-based sectors and capital intensive
industries. These sectors did not generate sufficient employment as they showed
only weak linkages to the national economy. Therefore, focus is guided by the
principles of accountability, decentralization and efficient resource allocation.
The objectives of the SNDP are to: accelerate infrastructure development;
economic growth and diversification; promote rural investment and accelerate
poverty reduction and enhance human development. While recognizing the
importance of balanced growth in all sectors of the economy, the SNDP priority
growth sectors are Agriculture, Livestock and Fisheries, Mining, Tourism,
Manufacturing and Commerce and Trade.
Good Governance
The strategic importance of Good Governance has been identified and initiated the
process of reviewing the Constitution of the Republic of Zambia in 2005. This
process is still ongoing and aims at reflecting adequately the principles of Good
Governance in the legal context (which is the separation of the three organs of
state). This process already resulted in an Amendment to the Constitution, the
Constitution of Zambia (Amendment) Act, 2009, which specifies timely
restrictions and processes for determining the annual national budget.
ZDA
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INVESTMENT PROMOTION
2.1
Institutions
The Zambian Development Agency (ZDA) was established in 2006 by the
Zambian Development Agency Act and became operational in January 2007. This
Act of Parliament merged 5 previously existing institutions (Zambian Investment
Centre (ZIC), the Zambia Privatization Agency (ZPA), Export Boards of Zambia
(EBZ), Small Enterprise Development Board (SEDB) and Zambia Export
Processing Zones Authorities (ZEPZA) into one statutory body. ZDA is therefore
not only fulfilling functions of an Investment Promotion Agency, but it is also
responsible for the promotion of exports, small business development and
continued privatization of state-owned enterprises. This is reflected in a multitude
of functions ZDA has to comply with according to Article 5, ZDA Act (2006)
(please see Act for further specifications). The overall aim of ZDA is to further
economic development of Zambia by promoting efficiency, investment and
competitiveness in business and promoting exports from Zambia. ZDA operates
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under the Ministry of Commerce, Trade and Industry. ZDA has also 6 regional
offices.
ZDA and its ZDA Act (2006) is in charge of all investors and investments in the
country and any industry, except (a) industries manufacturing arms and
ammunition, explosives, military vehicles and equipment, aircraft and any other
military hardware; (b) an industry manufacturing poisons, narcotics, dangerous
drugs and toxic, hazardous and carcinogenic materials; and (c) an industry
producing currency, coins and security documents.
ZDA provides additional facilitation services to registered investors which cover:
 Acquisition of land;
 Obtaining water, electric power, transport, and communication services and
facilitation for the investments;
 Regularizing their immigration status;
 Acquiring other licenses required to operate a business in any particular sector;
 Access any other after care assistance that may be required.
Bank of Zambia
The Bank of Zambia in its current form and function was established by the Bank
of Zambia Act, 1985. With the change of government in 1991, government
priorities changed and the macroeconomic management in Zambia. Consequently,
emphasis was geared towards creating a stable macroeconomic environment as a
prelude to sustainable economic growth since 1992. The new focus was now on
price stability and on ensuring a sound financial system which was expressed in a
new legal text, the Bank of Zambia Act, 1996.
This act states, accordingly, the main function of the Bank of Zambia is to
formulate and implement monetary and supervisory policies that will ensure the
maintenance of price and financial systems to promote a balances macro-economic
development. The Board of Directors of the Bank are responsible for the
formulation of the policy. The Board consists of the Chairman which is the
Governor of the Bank, appointed by the President, and up to 6 other individuals
that are not official or employees of the Bank, appointed by the Minister of
Finance. The Secretary to the Treasury in the Ministry shall be allowed to attend
any meeting of the Board but without any right of vote, nor fulfil the purpose of
quorum.
2.2
Investment and Export Incentives
General Incentives
The ZDA Act (2006) provides a wide range of incentives in form of allowances,
exceptions and concessions depending on size, sector and location of the
investment. A categorisation of investors (as described above) sets the different
incentives provided. The general incentives to investors are prescribed in the
Customs and Excise Act, Income Tax Act and Value Added Tax Act. They provide
fiscal incentives which are falling under the Zambia Revenue Authority.
Duty Draw Back
Scheme
In terms of customs duty, most capital equipment attracts duty rates of 0 to 5 %.
Under the Duty Draw Back Scheme another relief is granted if the following
conditions are met:
 The company or individual must be in the manufacturing business
 The company or individual must be an exporter or intends to start exporting
 The company must be in any sector other than the mining sector.
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Non-fiscal Incentives
Besides the numerous tax incentives, the ZDA Act also provides for non –fiscal
incentives. Investors, who invest at least US$250,000 and employ not less than 200
local persons, are entitled to a self employment permit and employment permits for
up to five (5) expatriates.
2.3
EPZs, Freeports and other Special
Economic Zones
Multi Facility
Economic Zone
The ZDA Act, Article 3 and 18, defines a “multi-facility economic zone” as being
an area or premise in Zambia that has been declared a MFEZ by the Minister of
Commerce, Trade and Industries with the approval of the Cabinet by statutory
instrument. The license specifies the limits of the area, the facilities that need to be
provided, terms and conditions under which the produced goods and services may
be sold, exported or otherwise disposed of, declare activities prohibited within the
zone, conditions under which the goods may be removed from the zone, the powers
and obligations of the investors, and any other matters necessary for the effective
and efficient operation of the MFEZ. The main objective is to attract industrial and
economic development by increasing activity in the manufacturing sector. MFEZs
are intended for both domestic and export-oriented activities in contrast to export
processing zones.
Qualification
Criteria for a MFEZ
An investor wanting to establish a Multi-Facility Economic Zone or operate in an
existing MFEZ is required to meet the following criteria:
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Be a registered company under Zambian law
Invest not less than the equivalent of US$500,000
Be in a MFEZ priority sector, and
Meet the approval of the ZDA, and in case of an MFEZ establishment, the
Cabinet, demonstrating that the investment will provide the following benefits:
o
o
o
o
o
o
o
o
o
o
o
Investor Obligations
Attract foreign and local direct and indirect investment
Specify the amount and quality of local employment creation
Specify the extend of skills development and skill transfer to local
entrepreneurs and communities, and to social development
Demonstrate the extent to which the project will lead to expansion
of local production
Specify the level of utilisation of local raw materials and
intermediate goods
Specify the introduction and transfer of technology
State to which extent the project will lead to a diversification of the
economy and which new products will be produced
State the extent to which the project leads to import substitution
and to which degree the project is export oriented
Specify to which extent the project will lead to increased foreign
exchange earnings
State to which extent the project leads to utilization of preferential
trade agreements
Specify the impact the proposed investment is likely to have on the
environment and, where necessary, adequate measures shall be
taken to deal with adverse environmental consequences in
accordance with the Zambia Environmental Management Act.
An investor in a MFEZ is obliged to provide and maintain standard infrastructure
such as facilities, factory building, warehouse, factory space, telecommunication,
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water sewerage net works, internal roads, uninterrupted power supply source,
waste water treatment and other such facilities required for the effective and
efficient operations of the MFEZ. All obligations and regulations in regard to
MFEZ are specified in the Multi Facility Economic Zones (General) Regulations,
2006. Permits to establish a MFEZ and licenses for working in an MFEZ are
proceeded via ZDA.
MFEZ Priority
Sectors
The priority sectors for MFEZs are outlined in the ZDA Act as well as Statutory
Instrument No. 27 of 2007 Zambia Development Agency (Multi-facility Economic
Zones) (Priority Sectors) (Declaration) Order, 2007 and Statutory Instrument No. 6
of 2008 “The Zambia Development Agency (Multi-facility Economic Zones)
(Priority Sectors) (Declaration) Order, 2008. They are the following:
(a) Information and Communication Technology (ICT)
i. Development of computer software
ii. Assembly/manufacture of ICT equipment
(b) Health
i. Manufacture of pharmaceutical products;
ii. Repair and maintenance of medical equipment;
iii. Provision of laundry services to medical institutions;
iv. Ambulance services;
v. Medical laboratory services;
vi. Diagnostic services; and
vii. Other medical services.
(c) Education and skills training
(d) Manufacture of:
i. Machinery & machinery components
ii. Iron & steel products
iii. Electrical and electronic products & components & parts thereof;
iv. Chemicals & petrochemicals
v. Pharmaceutical & related products
vi. Wood & wood products
vii. Palm oil & their derivatives
viii. Pulp, paper & paper board
ix. Textile & textile products
x. Transport equipment, component & accessories
xi. Clay-based, sand-based & other non-metallic mineral products;
xii. Plastic products
xiii. Professional medical, scientific, & measuring devices/parts
xiv. Rubber products
xv. Leather & leather products
xvi. Packaging & printing materials
xvii. Fertilizer
xviii. Cement
(e) Tourism
(f) Processing of:
i. agricultural products
ii. forest products
iii. non-ferrous metals & their products
iv. gemstones
There are two established economic zones and one industrial park. One economic
zone is in Chambishi in the Copperbelt area developed by the Zambia China
Economic and Trade Cooperation Zone (ZCCZ). The second one is the
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government owned Lusaka South Multi Facility Economic Zone (LS-MFEZ
Limited) established as a Special Purpose Vehicle. The Industrial Park is the
privately owned Roma Industrial Park in Lusaka.
MFEZ Incentives
The MFEZs provide special incentives for investors that are in addition to the
general incentives:
 Zero percent tax rate on dividends for 5 years from year of first declaration of
dividends.
 Zero percent tax on profits for 5 years from date of commencement of
operations, for year 6 to 8, only 50 percent of profits are taxable and years 9 &
10, only 75 percent of profits are taxable.
 Zero percent import duty rate capital goods, machinery for five years.
 Deferment of VAT on machinery and equipment including trucks and
specialized motor vehicles.
2.4
Tax Incentives
The main general tax incentives include incentives for income tax, Value-added
Tax (VAT), and Customs Duties which are covered by the respective Acts.
Income Tax
There is a multitude of general income tax incentives as described in the ZDA
Investor Guide Handbook (2011):
1. Income earned by companies in the first year of listing on the Lusaka stock
exchange qualifies for a 2% discount on the applicable company tax rate in
the particular sector, however companies with more than 1/3 of their
shareholding in the hands of Zambians qualify for a 7% discount;
2. Implements, machinery and plant used for farming, manufacturing or
tourism qualify for wear and tear allowance of 50% of the cost per year in
the first two years;
3. Building used for manufacturing, mining or hotel qualify for wear and tear
allowance of 10% of cost in first year and 5% of cost per year in subsequent
years;
4. Duty free importation of most capital equipment for the mining and
agriculture sectors;
5. Corporation tax at 10% on income from:
a) farming;
b) fertilizer production;
c) non-traditional exports;
6. Farm works allowance of 100% of expenditure on stumping, clearing,
prevention of soil erosion, bore holes, aerial and geophysical surveys and
water conservation; and
7. Development allowance of 10% of the cost of capital expenditure on
growing of coffee, banana plants, citrus fruits or similar plants.
8. Farm improvement allowance - capital expenditure incurred on farm
improvement is allowable in the year of incurring the expenditure.
9. Dividends paid out of farming profits are exempt for the first five years the
distributing company commences business.
10. Initial allowance of 10% on capital expenditure incurred on the construction
or improvement of an industrial building is deductible;
11. Foreign exchange losses of a capital nature incurred on borrowings used for
the building and construction of an industrial or commercial building are tax
deductible.
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12. Dividends declared by companies assembling motor vehicles, motor cycles
and bicycles are exempt for the first five years of initial declaration of
dividends;
13. Carry Forward of Losses.
CARRY FORWARD LOSSES
Copper and Cobalt mining
Other mining
Non-mining
Farming and non-traditional exports
Value Added Tax
YEARS
10 or (20 years for KCM
and MCM)
5 years
5 years
5 years
Incentives in relation to VAT are:
1. Relief for VAT registered enterprises on imports of eligible capital goods.
(VAT deferment);
2. Zero rate on export of taxable products;
3. Relief of vat on transfer of business as a going concern;
4. Equal treatment of services for vat-reverse vat;
5. Cash accounting for specialized associations e.g. association of building and
civil engineering contractors;
6. VAT relief on input tax paid for purchases made by registered suppliers.
7. Input tax claim for three months prior to vat registration for businesses that
have already commenced trading;
8. Reduction of VAT rate for investors in tax free zones.
VAT Sector-Specific Incentives:
Agriculture
1. Input tax claim for three months prior to vat registration for businesses that
have already commenced trading;
2. Reduction of VAT rate for investors in tax free zones.
Manufacturing
1. Refund of Zambian VAT on purchase and export of Zambian products by
non-resident businesses under the commercial exporters scheme;
2. Input tax claim for three months prior to registration for businesses that have
already commenced trading.
3. Input tax claim for two years prior to commencement of production.
Mining
1. Input tax claim for five years on pre-production expenditure for exploration
companies in the mining sector;
2. Zero rate on mining products for export.
Tourism
1. Zero rate-other tourist services;
2. Refund to non-resident tourists and visitors;
3. No import vat on all goods temporarily imported into the country by foreign
tourists.
2.5
International Trade & Export
Promotion
Import Procedures
Generally, all business entities engaging in both domestic and international trade
are required by law to be registered with the Patents and Companies Registration
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Agency (PACRA) which is an Executive Agency of the Ministry of Commerce,
Trade and Industry. For the detailed process please see section 3.2.
Information in this section is mainly extracted from the ZDA Investor Guide
Handbook (2013) which provides a detailed overview of relevant processes,
requirements, laws and conditions applicable to investors in Zambia.
Customs Clearance
and Valuation
For clearing goods through Customs, the importer must present the usual
commercial documents such as bill of lading, airway bill and commercial invoice.
The Import Declaration Form is used for statistical purposes, and no fee is
required. For goods to be cleared at the border, the standard form for entry and exit
is used which is the Zambia Revenue Authority (ZRA) form CE 20. Zambia is
using the Automated System for Customs Data and Management (ASYCUDA).
Like that, customs clearance can be accomplished within hours. However
incomplete forms and other difficulties, e.g., lack of supporting documents, can
result in substantial delays.
Tariff Structure
Tariffs are applied on the c.i.f. (cost, insurance and freight) basis. Customs tariffs
are calculated on the basis of the dutiable value, based on the WTO Agreement on
Customs Valuation. Most tariffs are ad valorem, but a few specific tariffs remain.
Zambia uses the international harmonized system. The Zambian tariff schedule is
structured around four tiers: 0%, 5%, 15% and 25% rates of duty. Virtually all raw
materials and most industrial or productive machinery fall within the 0 and 5
percent tariff categories, while most imported intermediate goods are subject to 15
percent. Imported final products are rated at 25 percent. Zambia has a simple
average import tariff which is about 14 percent.
Import Duties
There are three categories for import duties:
25% mainly for finished products
15% intermediate goods
0 – 5% raw materials and capital goods
Other levies are excise duties on certain products at rates ranging from 3 percent to
145 percent. The excise duty is collected on mineral water, cane and beet sugar and
some derivatives, beverages, tobacco and some derivatives and substitutes,
electricity and petroleum products.
Other Levies and
Charges
Value Added Tax (VAT) applies to both goods and services, of domestics
production and those that are imported. The standard rate is 16%. VAT is also
levied on the c.i.f. value plus customs tariff. Some exceptions exist and cover
social services such as education, health and funeral services.
Import Restrictions
There are import prohibitions for environmental, health and security reasons.
Import licensing is required for most agricultural products which represent often a
delaying factor for operations. Currently, Zambia does not apply trade sanctions.
Sanitary and
Phytosanitary
Regulations
Sanitary and phytosanitary regulations apply to imports of live animals, plants and
seeds. From the exporting country, a sanitary certificate is required as a
prerequisite to the issuance of the veterinary permit. Food imports must satisfy the
provisions of the Food and Drugs Act of September 1978 which requires packaging
and labelling requirement for food, and standards for maize samp, rice and bread.
Export Procedures
For exporting products, exporters must complete an export declaration form
(standard customs authority form ZRA CE 20), which serves mainly statistical
purposes. An original commercial invoice and a packaging list for shipment should
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accompany the form CE20. An airway bill or bill of lading for transportation of
exports should also be obtained either from the freight forwarder or the transporter
being used. There are no export taxes, charges or levies. If there are preferences
that are being claimed in the exporting market (e.g., reduced tariffs), then an
appropriate stamped certificate of origin, from the ZRA is required. COMESA,
SADC, EU and AGOA textiles have different certificates of origin.
Sanitary and
Phytosanitary
Certificate
Some commodities are covered by the Veterinary Department, and for them a
sanitary/phytosanitary certificate is required. The phytosanitary certificate is
obtained from the Mount Makulu Research Station for seeds, stems, and fruits.
There is also a very limited number of goods requiring a special export permit.
Gemstone exports require a permit from the Ministry of Mines; and timber requires
a timber verification certificate from the Forestry Department. Additional
information on exports may be obtained from the ZDA Export Division.
Regional
Preferential Tariffs
Based on the double membership of Zambia in COMESA and SADC, it has both
preferential and non-preferential rules of origin. In terms of preferential rules,
COMESA provides for four alternative criteria for determining origin. The SADC
rules of origin, however, are negotiated, in many cases, on a product-by-product
basis which is making them complex and varied across products.
2.6
Other Issues
Promotion of Micro
and Small
Enterprises
The ZDA Act (2006) provides special incentives for investors who are designated
as micro or small enterprises under the Act. As one function of ZDA is inherited by
its mergence with the Small Enterprise Development Board (SEDB), the Act
explicitly states the function to promote and facilitate the development of micro
and small business enterprises in articles 22-25. The Trade Licensing Act is
furthermore not applicable to micro or small business enterprises registered under
the ZDA Act (2006).
In addition to the general incentives provided by the Act, such investors are entitled
to:
 Income exempt from tax for the first 3 years for an enterprise in an urban area;
 Income exempt from tax for the first 5 years for an enterprise in a rural area.
Private Sector
Development
Programme
In order to promote the economic development and especially the private sector,
government has set up the Private Sector Development (PSD) Programme. It
covers over 80 measures covering policy environment, institutions, trade
expansion, infrastructure, citizen’s empowerment, business facilitation and
economic diversification. Action Plans were developed and one plan was, for
example, the creation of ZDA as well as plans for Ministries to tackle
administrative barriers. Due to its success, the second phase of the programme was
developed and recently approved to start soon.
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3
ACCESS AND ADMISSION OF FOREIGN
INVESTORS
3.1
Foreign Investment & Capital Mobility
Investment
Legislation and its
Reasoning
The current National Development Plan (SNDP) guides the Zambian Development
Agency (ZDA) Act of 2006 by providing the sectors where government seeks
development. These sectors are made more attractive for investments by providing
special incentives (please see below for more details on the individual incentives).
Open Sectors and
Restrictions
Foreign investors may invest in any activity that is open to the private sector, with
the exception of sectors closed to the private sector such as arms production,
security printing and the manufacturing of dangerous substances.
Investor Definitions
The ZDA Act (2006) defines / clarifies the different terms relevant to investment
operations in Article 3.
Foreign Investment: means investment brought in by an investor from outside
Zambia.
Foreign Investor: means a person who makes direct investment in the country and
who in case of a natural person is not a citizen or permanent resident of Zambia
and in the case of a company is incorporates outside Zambia.
Investment: means contribution of capital, in cash or in kind, by an investor to a
new business enterprise, to the expansion or rehabilitation of an existing business
enterprise or to the purchase of an existing business enterprise from the State.
Investor: means any person, natural or juristic, whether a citizen of Zambia or not,
investing in Zambia in accordance with this Act, and includes a micro or small
business enterprise and rural business enterprise.
Local investor: means a person who makes direct investment in the county and
who in the case of a natural person is a citizen or permanent resident and in the
case of a company is incorporated in Zambia.
Investor Surveys
Zambia has conducted four investor surveys in 2002, 2007, 2009, 2010, 2011 and
2012 assessing the opinion of investors on the different processes, conditions of
investment, current investment climate, as well as actual investments realised,
employments created etc. The surveys were conducted by the ZDA, the Bank of
Zambia and the Central Statistical Office. Besides collecting and displaying
valuable information on the extent and success of investments, they also present a
monitoring tool for ZDA to evaluate the extent of realisation of approved
investment pledges.
3.2
Foreign Investment Establishment,
Registering and Licensing Processes
Any investor wishing to receive incentives and guarantees provided by the ZDA
Act is required to apply at ZDA for approval of the investment project under the
ZDA Act (2006). ZDA will then conduct a screening process of the project and
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decide on the extent of special conditions and incentives that apply. The project is
approved by granting of the investment certificate.
Business
Establishment
Before applying for the investment certificate, all businesses engaging in both
domestic and international trade are obliged by law to register with the Patents and
Companies Registration Agency (PACRA) which is an Executive Agency of the
Ministry of Commerce, Trade and Industry. ZDA provides the company
registration service also in-house as it operates as a one-stop shop.
The registration of the business is either by:
 a business name;
 a public or private company (therefore being incorporated in Zambia), or
 a foreign company.
Conditions for
Company Registration
Conditions for registration are that the applicant suggests 3 possible company
names; the company has a minimum of 2 shareholders, and that at least 50% of the
shareholders live permanently in Zambia. The last condition aims to encourage
Joint Ventures of foreign and national partners and entities.
The minimum capital required for registering a public or private company is K5
million (about US$ 950). Registration fees also vary according to the form of
business and process. They include name search, forms, processing of application
forms, etc.:
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K10 name clearance;
K80for registering a business name;
K255for registering a limited company;
K1, 350for a foreign company.
Foreign companies are allowed to register with the Registrar of Companies within
28 days of setting up or acquiring an established place of business according to the
Company's Act. The documentation requirement may be obtained from the Office
of the Registrar of Companies and all forms can be found online. In general, all
companies must submit annual returns with the Registrar of Companies within
three months after the end of the financial year or one month after the Annual
General Meeting if it is held within three months after the financial year.
Good Performance
in Starting a
Business
The process of registration takes about 2 days. According to the World Bank Doing
Business Ranking 2014, Zambia performs well in terms of ease of starting a
business for the last 4 years already. The number of procedures is 6 which is almost
half of the regional average (10) and requires on average only 18 days in total.
ZDA stated that since 2009, the required list of licenses had been reduced to
improve the processing time..
Investment
Approval
After registration as a company, the investor can submit his application for the
Certificate of Registration to ZDA. The Zambia Development Act No. 11 of 2006
provides for investment incentives and investment guarantees which the investor
can obtain when registering with ZDA. Any future expansion of the investment or
diversification can, again, be applied for in order to take advantage of guarantees
and incentives according to the Act. The major documents required to support an
application for a Certificate of registration include the following documents:
 Copy of Certificate of Incorporation, issued by the Registrar of Companies;
 Certificate of Share capital;
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Official list of shareholders / directors;
Proof of finance (certificate of deposit at bank or latest bank statement;
Detailed Business Plan;
Proof of having secured a place / land to operate from (Lease Agreements or
Title Deed or Letter of Offer).
Applications for a Certificate of Registration in some sectors of the economy
require proof that application for subsidiary permits from relevant institutions or
ministries have been lodged. This is, e.g., the case in the manufacturing sector
where additional licenses are needed from the city, municipal and district councils.
The screening and approval process takes about 24 hours. For granting the
certificate, the ZDA Approval Committee has to be convinced that the project
brings developmental benefits to the economy and will not harm the environment.
The certificate of registration is approved within 24 hours as long as all registration
requirements are met. With the investment license, the investor is guaranteed all
advantages and rights as provided in the ZDA Act.
EIA
In case an Environmental Impact Assessment (EIA) has to be undertaken, an extra
period of 90 days shall be taken into account. An assessment takes at least about 30
days and time for identification and hiring of a consultant has also to be
considered.
After granting of the certificate of registration, ZDA provides further facilitation
and support to investors for acquiring secondary licenses and permits as well as
support in finding suitable land. Please see section 3.4 below for more information.
Depending on the respective sector, diverse licenses and permits have to be
acquired as described above. In the following, the ZDA Investor Guide Handbook
is cited on the different sector requirements.
Tourism Sector
Zambia Wildlife Authority Permit:
“Investment projects that have to be located in a Game Management Area will
require a permit issued by the Zambia Wildlife Authority (ZAWA). Applications
for the permit should be supported by the following documents:
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Project proposal;
List of Shareholders;
Information on promoters' business experience;
Recommendation letter from the District council;
The District Council may issue a recommendation letter to ZAWA, upon
submission of:
 Letter of intent;
 Letter of Consent from the chief (Game Management Areas fall under traditional land
which is under the jurisdiction of the local chief);
 Project proposal;
 Building Drawings.
Tourist Enterprise License
The Zambia Tourist Board authorizes the establishment and licenses all tourist
enterprise in Zambia under the Tourism Act, Cap 155 of the Laws of Zambia. A
Tourist Enterprise includes the construction of an hotel or commercial
accommodation establishment, a tour operating business, a travel agency, a camp
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site, restaurant or café, a discotheque or night club, a campsite, an air charter, a
convention centre, and such other enterprise catering for tourists as the Minister
may, by Statutory Instrument, declare.
The license may be issued upon submission of the following documents:
 Five year business plan;
 Cashflow statement or proof of capital requirement;
 Building and or architectural plans;
 Letter from promoters' commercial bank;
 Financial and personal information about the shareholders;
 Curriculum vitae in respect of the shareholders;
 Copy of the company's certificate of incorporation;
 Memorandum and Articles of Association (for limited companies);
 Title deed or lease agreement;
 Most recent audited accounts (for existing businesses);
 Environmental Impact Assessment or Project Brief (for small companies);
 No objection letter from ZAWA (for project locating in Game Management
Areas; or National Parks);
 Investment License issued by the Zambia Development Agency.
Hotel License
The Ministry of Tourism through the Hotels Board may issue a hotel licence to the
applicant upon submission of the following documents:
 Tourist Enterprise Licence;
 Health permit and fire safety certificate from the local council;
 Liquor licence from the local council.
The furniture and equipment must be in place and the premises must pass final
inspection from the Hotels Board
Mining Sector
The Ministry of Mines, Energy and Water Developmentis responsible for the
issuance of permits and licences relating to investment in the mining sector. The
licences and permits issued include large scale mining, small scale mining,
prospecting licence, prospecting permit, retention licence, gemstone licence,
gemstone sales certificate, artisan’s mining rights and the reconnaissance permit.
Applications for the above permits and licences must be supported by the following
documents:






Financial Sector
Topographical maps of the area;
Certificate of incorporation and articles of association;
Photocopies of passports of directors and shareholders;
Bank statements and reference letters from applicants’ bank;
Programme of operations and estimated costs;
Statement of mineral deposit in the mining area.
The Bank of Zambia, as the Central Bank and an agency for executing
government’s monetary policy, is responsible for issuance of banking licences.
The applicants for a banking licence should meet the following requirements:
 Minimum capital of US$ 100m for foreign banks and K250 million for nonbank financial institutions;
12
 Complete questionnaire for principal managers and directors;
 Disclose any criminal record for all principal managers and directors;
 Provide details about principal managers’ experience in banking.
The applicants will further be required to submit the following documents:
 Biographical data form;
 Business plan with three year financial projections ( Profit & Loss Account,
Cashflow and Balance Sheet statements);
 Curriculum Vitae for all principal managers and shareholders;
 Copy of the company’s Certificate of Incorporation;
 Copy of the company’s Articles of Association;
 Approval by the home country supervisors (usually another Central Bank), if
the applicants are foreign registered financial institution.
Transport Sector
Air Transport
The Department of Civil Aviation, which falls under the Ministry of Transport and
Communications, is responsible for issuance of the Aircraft Licence. The following
document will be required to support an application for the licence:












Copy of type of certificate;
Certificate of technical data sheet;
Copy of current certificate of airworthiness;
Copy of the flight manual or equivalent;
Complete set of manufacturer’s maintenance, overhaul and repair manual and
an illustrated parts catalogue;
Complete set of manufacturer’s service bulletin or equivalent documents
relating to the airplane;
Copy of the crew operations manual;
Copy of the mass and balance manual;
Flight test reports for the avionics systems and the aircraft;
Electrical load analysis covering all services;
Complete set of wiring diagrams covering all radio and electrical installations;
Copy of the Master Minimum Equipment list.
Road Transport
Road Service Licence
The Road Traffic and Safety Agency may issue the road service licence upon
submission of the motor book, the company certificate of incorporation, the motor
vehicle examiner’s report and bank statement.
Energy Sector
Energy Licence
The Energy Regulations Board is responsible for issuance of licences in the energy
sector. Applications for energy licences should be supported by the following
documents:
 Five year business plan;
 Current and latest audited financial statements;
 Details of any expected subsequent substantial capital outflows including major
decommissioning costs;
 Estimates of net annual cash flows.
13
Health Sector
Certificate
Investors in the health sector are required to obtain a certificate from the Medical
Council of Zambia (MCZ). Applications for the certificate should be supported by
the following documents:
 Certificate of incorporation
 List of Directors
 Qualifications of paramedical and logistical staff that should be registered and
having practicing licence with MCZ.
The MCZ would inspect the premises, equipment and protective wear prior to
issuance of the certificate.
Education Sector
Certificate
Potential investors in the education sector are required to obtain a certificate from
the Ministry of Education. The supporting documents for the certificate include the
certificate of incorporation and qualifications of the teaching staff. The Ministry of
education officials would inspect the building premises and the teaching facilities
prior to issuance of the certificate.
Telecommunications Sector
Radio or Telecommunications Licence
The Zambia Information Communication and Technology Authority, which falls
under the Ministry of Transport and Communications, is responsible for issuance
of the above licences. Applications for the licences should be supported by the
following documents:
 Certificate of Incorporation
 Business Plan
 Detailed description of the nature of the service, if not indicated in the business
plan
 Audited Accounts
 Return on allotment shares
 Bank reference letter.
Other Sector
Permits and
Licenses
The Project Brief and Environmental Impact Statement
Most projects in all sectors other than the service sector require authorization from
the Zambia Environmental Management Agency (ZEMA) It is a requirement under
the Environmental Protection and Pollution Control Act (EPPCA) Cap 204 of the
Laws of Zambia that before a project is undertaken, an Environmental Project Brief
(EPB) or an Environmental Impact Statement (EIS) is submitted to ZEMA to
ascertain its impacts on the environment. A Decision Letter will be issued by the
ZEMA when they are satisfied that the project will have no negative environmental
impact.
Title Deeds
Lands Department is responsible for issuance of Title Deeds upon submission of
either an Investment Certificate issued by the Zambia Development Agency or the
following documents:




Certificate of Incorporation
Land sketch
Letter of consent from the chief
Recommendation letter from the local council
14
Whole Sale, Manufacturer's and Agents' BusinessPermits
Upon submission of the Certificate of Incorporation, the local council would issue
the above Business Permits
Forest Concession Licence
The following documents are required to support an application for the above
licence:







Letter of consent from the local chief
Letter of consent from the local council
Letter of recommendation from the respective Principal Extension Officer
Company's Certificate of Incorporation
Map of the area of operation
Plan of operation
Bank statement to prove that the applicants have more than K 10,000
The applicants must be able to pay for a minimum of 200 to 600 trees and prove
possession of adequate machines and equipment.”
3.3
Foreign Employment & Residence
Business Visas
Visitors from COMESA or SADC states as well as Commonwealth countries
usually do not need a visa to visit Zambia. However, there exist some exceptions
such as for nationals from Gambia, Ghana, India, Pakistan, Papua New Guinea, Sri
Lanka and the United Kingdom. Visas for any other nationals can be obtained at
the point of entry into Zambia for a fee of US$50 and more, depending on the type
of entry visa.
Investors Permit
Foreign investors that are allowed an Investors Permit have to apply for such
permit at the Immigration Department. It issues Employment permits in accordance
to the Immigration and Deportation Act (vol. 9, ch. 123) on the basis of the
applicant’s experience and qualifications. A local labour market test is also
conducted to check of such qualifications cannot be found locally. ZDA offers to
assist the investor in applying for Employment and Investors Permits. The
application should be supported by the following documents:





Completed application form
Application letter from company on behalf of candidate
Certificate of incorporation
Certificate of share capital
Investment certificate proof of finance (Bank Transfers, Customs form CE
20)

Photocopy of Passport

Two passport-size photos

Police Clearance Certificates from country of origin
Employment permits are issued by the Immigration Headquarters, based on the
submission of the following documents:
Employment permit



Completed application form
Application letter from company on behalf of candidate
Signed contract between candidate and company
15







Work Permits for
Expatriate Workers
Professional and academic qualifications(certified copies and translated to
English)
Experience reference letters
Certificate of incorporation
Investment Certificate
Photocopy of passport
Two passport-size photos
Police Clearance Certificates from country of origin
Employers seeking to employ expatriate staff are required to apply for
Employment permits from Immigration Headquarters. Such permits are usually
issued for an initial period of two years with provision for subsequent extensions or
renewals.
Companies that hold an Certificate of Registration from ZDA and invest a
minimum of US$ 250,000 are entitled to Employment permits for up to five
expatriate employees according to the ZDA Act.
The fees relating to work permits are indicated below (extracted from the ZDA
Investor Guide Handbook 2009):
Employment/ Work Permit
Issuance K3,000
Renewal K3,500
Replacement K3,000
Addition of name to permit K500
Investors Permit
Issuance K2,000
Renewal K2,500
Variation K2,500
Replacement K2,500
Occupation Change K1,500
Payments for the above fees must be made by bank certified cheques and made payable to
the Director General of Immigration. Cash payments are not acceptable.
UNCTAD Review
Investors stated in the UNCTAD assessment (2006) that many encountered difficulties in
applying for work permits as the process took considerable time and energy.
3.4
Foreign Investor Access to Land
(Foreign Property)
The ZDA Investor Guide Handbook (2013) provided updated information on the
different systems and processes for land tenure and acquisition. Hence, the
following part is mainly extracted from the Handbook.
Land Availability
A new Land Act No. 29 of 1995 came into force on 23 September 1995. There are
two categories of Land in Zambia:
 State land: represents only 6% of land in Zambia. This land is zoned into
residential, commercial or industrial use by the District Councils according to
their jurisdictions.
 Customary land, also known as tribal land: cover approximately 94% of all land
in Zambia and falls under the jurisdiction of the traditional chiefs.
Titled land is regulated under the Land Act of 1995 and vested in the President.
Customary Land and any matters such as settlement on customary land are
governed by the customary law and not under the Land Act.
16
Systems of Tenure
There are two different types of tenure in Zambia: leasehold (also known as titled
land) and customary tenure. No land can be owned in freehold. The leasehold
tenure runs for a period of 99 years and is renewable for further 99 years. Another
renewal is possible if no conditions in the existing agreement have been breached.
Customary land can be converted to leasehold and thus allowing it to be used as
collateral. According to the 1995 Land Act, the land has then a value and can be
sold even without improvement on the land.
Alienation of
State Land
Acquisition of land in an area which is designated as State Land requires the
consent of the relevant District Council as the District Council is representing the
consent of the President. Land that does not fall within the jurisdiction of any
council can be alienated upon direct application to the Commissioner of Lands.
The Commissioner of Lands will then make a formal offer to the applicant, which
will contain similar conditions to those obtaining in the offer made for an
application of land situate in the Customary Area.
Purchase of Private
Land
Land in private ownership can be inherited, bought and sold. Title deeds are issued
by the Commissioner of Lands (which represents the ‘State Consent’). In any
instance, ‘State Consent’ has to be obtained by the vendor before title deeds can
pass to the purchaser.
Lands Tribunals
The Land Act of 1995 provides for establishment of a Lands Tribunal in order to
speed up the resolution of land disputes. The head of the Tribunal is a person who
is qualified to be a judge of the High Court. Any decision taken by the Tribunal can
be subject to appeal to the Supreme Court within 30 days of the decision.
Common Leasehold
Schemes Act of 1994
According to the Common Leasehold Schemes Act of 1994, it is now possible to
purchase a unit in a block or blocks of flats, offices and any other multiple
developments. The Act allows for phased development which enables the
developer to dispose of units in each phase in order to release money for
developing other phases.
Acquisition of Land
by Non-Zambians
A non-Zambian can acquire land under following conditions:
 He/She is a permanent resident in Zambia;
 He/She is an investor according to the Zambia Development Agency Act or any
other law permitting investment in Zambia;
 A person registers a company under the Companies Act, with no less than 75%
Zambian shareholding. The Title Deed will be issued in the name of the
registered company;
 Acquisition under a short term tenancy of not more than 5 years;
 If the person is granted concession or right under the National Parks and
Wildlife Act;
 In exceptional cases, by Presidential consent in writing even if the above
conditions are not met.
The procedures to follow in such case are:
 Before the land can be bought or sold, the ‘State Consent’ has to be obtained
through the Commissioner of Lands.
 The consent is then issued by the Commissioner of Lands on application and
normally does not take more than some days as a matter of routine.
17
 If the applicant is not informed about the approval or rejection within 45 days of
filing the application, the application is deemed to be granted. In case that the
consent is refused, the reasons for refusal must be furnished to the applicant
within 30 days.
UNCTAD (2006) remarks at this system, that the requirement for ‘State consent’
does not appear to serve any public purpose seen that no delays seem to be
occurring. As such, it is only an intervention in the land market which imposes
unnecessary risks for investors. UNCTAD therefore suggested to consider removal
of this provision and have government oversight to land use matters and to due
processes in the conversion of land.
Acquisition of
Land in a
Customary Area
To acquire land in a customary area, it is required to present:
 The written consent of the area Chief to declassify the customary land.
 Approval of the local District Council in the area to demarcate customary land.
 Additional approval from the Director General of Zambia Wildlife Authority, if
the land is situated in Game Management Area.
Once these approvals are obtained, they should be submitted to the relevant District
Council, which in turn will submit the documents to the Commissioner of Lands.
After that, the Commissioner will make a formal offer to the applicant in a letter.
This letter of offer will stipulate among other conditions:
 Consideration Fee: This fee is not a fixed amount but depends upon locality,
services provided by the state or council and other related factors.
 Survey Requirements: The survey can be carried out by a private or
governmental Surveyor. A legal diagram or plan has to be attached to the lease
agreement as mandatory requirement prior to issuance of the Certificate of
Title.
 Preparation Fee: The office of Commissioner of Lands charges fees for the
preparation of a lease. These fees are subject to change but they are fixed by
statutory instrument.
 Registration Fee: This fee is charged by the Lands and Deeds Registry before
the lease is registered and the certificate of title issued.
 Property Transfer Tax: The Property Transfer Tax Act prescribes that, if land is
purchased from a private person then currently 6% of the value of land is paid
to the ZRA by the vendor. When land is acquired from the State, no tax is to be
paid.
Upon acceptance of the offer and payment of these described charges, a lease over
99 year will be prepared transferring the title. If the land is already surveyed, the
title deeds can be issued within 60 days. If that is not the case, the process can take
up to 3 months or more.
Investor Perceptions
According to investor perceptions described in the UNCTAD report (2006), the last
process of consent from the State can take up to 6 months. Furthermore, investors
reported the following constraints in 2006:
 Slow processes of the council in opening up of land for allocation
 Cumbersome procedure in the conversion of customary land to titled land/
leasehold land. This aspect is especially important seen that most land in
Zambia is customary land.
18
 Poor record-keeping
 Over centralisation of processing procedures
 Insufficient co-ordination between the Ministry of Land and the councils
Based on the fact that some land tenure cases required up to 20 years to be
processed, government is aiming for improving the procedures and processes. The
aim is to shorten the processing time to 7 days which is challenging but possible.
Information
Information on the availability of land can be obtained from:





Land Bank
Programme
Offices of the Commissioner of Lands which are in all provinces
Council and Commissioner of Lands advertisements in national press
Real Estate Agents
Zambia Development Agency in liaison with Ministry of Lands
Direct contact with Chief and District Council.
ZDA together with the Ministry of Land and the Surveyor General’s department
has established the Land Bank programme to identify land for investment purposes.
The idea is to identify potential land and reserve it for investor purposes. Investors
searching for land to operate can then gain easier access to it. In case the identified
land is customary, the government will negotiate with tribal chiefs to covert its
status in anticipation of investment. For urban areas where all land is titled, the
programme intends to purchase the land and lease it or sell it to the investor.
Currently, government is investigating new sectors such as biofuel production,
rubber, coco plantations, palm oil and other sectors. Feasibility studies have been
conducted and the programme is in the process of identifying and acquiring
suitable land for the development of these sectors through investment.
19
4
FOREIGN INVESTMENT OPERATIONS
4.1
Employment
The Department of Labour, which falls under the Ministry of Labour and Social
Security, is responsible for formulation of labour policy. The department
administers the statutes governing employer/employee relations. The ZDA Investor
Guide Handbook provides a good overview of all relevant labour laws.
The major pieces of legislation relating to the labour market in Zambia include:
Employment Act
The Employment Act covers all employment conditions and is the fundamental
labour law in Zambia. It provides for the basic employment contractual terms such
as:




minimum contractual age;
establishment of employment contracts;
settlement of disputes arising from such contracts of employment;
the appointment of Labour Officers and other staff for the administration of the
Act;
 certain conditions of employment such as ordinary leave, sick leave, maternity,
redundancy and welfare of employees.
Industrial and
Labour Relations
Act
Rights and obligations of employers and employees are contained in the Industrial
Labour Relations Act from 1993 such as:
Labour Unions and
related issues
The Act encourages works councils as a mean of consultation of employees to the
management. It also defines the role of trade unions and the framework for strikes
and minimum wages. Zambia has a strong trade union movement and is highly
unionized. Therefore most wages are determined through collective bargaining.
When an agreement has been achieved, it is forwarded to the Minister for approval.
In some types of work, such as management, workers cannot be represented in
unions. Under such circumstances, the minimum conditions are set by the
Employment Minister though a statutory instrument every two years.
 the conduct of industrial relations;
 the establishment of workers/employers organisations, their registration and
administration;
 collective bargaining;
 Settlement of dispute through conciliation and arbitration by the Industrial
Relations Court, established under the Act;
 Consultative Machinery.
On the other hand, the Zambia Federation of Employers (ZFE), an umbrella
organisation for employers, articulates the interest of employers. ZFE is
represented at the Tripartite Labour Consultative Council, a body comprising the
representatives from Ministry of Labour and Social Security and the unions
(through an umbrella body, the Zambia Congress of Trade Unions - ZCTU).
Minimum Wages
and Conditions of
Employment Act
Through the Minimum Wages and Conditions of Employment Act Cap 276, the
Minister is enabled to determine minimum conditions of employment for
categories of employees not effectively covered through collective bargaining.
20
Such employees include general workers, drivers, clerks and management, as
described above.
Employment of
Young Persons and
Children Act
Protection for young persons and children in an employment relationship is
covered by the Employment and Young Persons and Children Act. It is the major
law against child labour and abuse.
Employment
(Special Provisions)
In state of emergency, this act may be activated and various regulations may be
promulgated with regard to labour and employment.
Allowances
The labour legislation provides for a multitude of allowances and employee
protections in addition to the general salary. Normally, there are two categories of
employees namely the unionised and non-unionised (management) staff.
Conditions of service for non-unionised employees are normally fixed by top
management, while those for unionised employees are negotiated through
collective bargain / agreement. In industries or companies where conditions of
employment are not regulated by a free collective bargaining, the Minimum Wage
and Conditions of Work Act provides processes and tools for determining statutory
minimum wages and other conditions of employment. In addition, there are several
allowances commonly added to the basic salary, which include:




Housing;
Transport;
Children's medical and education;
Water, electricity, holiday travel (usually for senior management staff).
All allowances are taxable at the same rate as the basic salary. Besides, there are
also common non-cash benefits such as:
 Transport to and from work;
 Subsidized meals in staff canteen;
 Sporting and recreation facilities.
Pensions and Life
Insurance
Membership of a pension scheme may be a condition of employment and most
employers provide a pension scheme for their employees with the National
Pensions Scheme Authority (NAPSA). Employers can establish or join other
pension schemes under the Pension Scheme Regulation Act. Insurance companies
offering pension schemes are, for example:




The Zambia State Insurance Corporation
Madison Insurance
Professional Insurance
Africa Life Insurance
However, individual persons are normally responsible for their life insurance.
Medical Coverage
and Maternity
Benefits
All employers are obliged, by the Minimum Wages and Conditions of Employment
Act, to grant an employee full pay in case that illness hinders the employee to
work. In such case, a certificate has to be provided from a registered physician. The
maximum period for which such benefit may be given is three months at full pay,
followed by three months at half pay. Some employers provide health and medical
coverage through membership to private clinics to which the employee and
employer contribute equally. It is often also the case that voluntary medical
payments for employees’ family members are paid the employer. This, however, is
21
more usual in smaller business entities. The Act also requires provision of paid
maternity leave for female employees for up to 90 days provided such female
employees have worked for a minimum of twenty four months with their
employers.
Housing
According to the Employment Act, employers have to provide to employees one of
the following: option
 Housing or housing allowance in lieu thereof
 House loan or advance towards the purchase or construction of a house
 Guarantee facility for a mortgage
Working Hours
The normal working hours in Zambia is 40 hours per week for office workers and
45 hours per week for factory workers. The normal weekly hours should not
exceed 48 hours under the Minimum Wages and Conditions of Employment Act.
Overtime work is regulated at one and half times of the normal work payment rate
and twice the normal rate on weekends and public holidays.
Paid Holidays
Employers must grant a minimum of 24 days of paid leave annually. It is, however,
a normal practice for employers to provide employees with more leave days than
prescribed in the Minimum Wages and Condition of Employment Act which will
depend on the rank and nature of the employee's job.
Special Leave
Special leave up to 7 days' paid leave has to be granted on the death of an
employee's spouse, child, mother or father. The employer is also obliged to provide
for a funeral grant for a standard coffin, cash and mealy meal in the event of death
of an employee, spouse registered child or dependant of the employee.
Termination of
Employment
A contract of employment may be terminated under the Zambian law through:





Resignation of Dismissal;
Normal retirement or medical discharge;
Expiry of contract;
Redundancy;
Frustration, such as death.
Under Section 26A of Statutory Instrument No. 15 of 1997, an employer is obliged
to allow an employee the opportunity to be heard prior to termination of the
contract of employment if the termination is on grounds related to the employee's
conduct or performance. This obligation on the part of the employer is in
conformity with the International Labour Organisation Convention. Furthermore,
the Zambian law prescribes the minimum benefits payable to the affected
employee, and requires payment of full wages for an employee declared redundant
until the redundant benefits are paid.
Redundancy
Benefits
The employer is required to pay at least one month's notice and redundancy
benefits of not less than two months' basic salary for each completed year of
service. The total redundancy adds up to 3 months, therefore. Compared to other
countries, UNCTAD (2006) classified the redundancy payment as very high and it
was negatively mentioned in investor surveys. Many investors tend to opt for shortterm contracts instead.
Equal Opportunities
The Zambian law and practice prohibits discrimination on the basis of race, tribe,
political opinion, colour, creed or sex.
22
4.2
Business Taxation
The legal framework of the Zambian tax system is covered by the Income Tax Act,
the Customs and Excise Act and the Value Added Tax Act. The implementing
agency in Zambia is the Zambia Revenue Authority (ZRA) and the responsible
ministry for tax policy formulation is the Ministry of Finance and National
Planning.
ZRA registration
With registration at the Registrar of Companies, ZRA receives automatically a
notification and a single identification number is issued to the business entity. The
tax year runs from 1 April to 31 March of the following year. Taxpayers are
generally expected to adopt the 31 March as the accounting date and ZRA's prior
approval is required if the taxpayer proposes to adopt a different accounting date.
Any change in the accounting date also requires prior approval from ZRA.
The principal taxes for business entities include direct taxes such as corporate
income tax, Pay-As-You-Earn, and other personal income, Customs and Excise
duties, Value Added Tax (VAT), property transfer tax and mineral royalty
according to the Mines and Minerals Act 1995.
Corporate Tax
The general corporate tax is at 35%. However, there are several preferential rates
for sectors that the government wants to promote. Income from the agricultural
sector and non-traditional exports (which are all exports except copper and cobalt)
is levied at 10%. Companies listed on the Lusaka Stock Exchange are taxed at 33%
and banks with income of more than K250 million are levied at the rate of 35%.
Personal Income
Tax
The personal income tax is levied in the range of 25-35 %. The maximum rate for
farmers is 10 %. Employers have to register and operate a Pay-As-you-Earn
(PAYE) scheme under which they are required to deduct the appropriate tax from
the salary/wage of the liable employees and remit the tax to the ZRA. By legal
obligation, the employer is required to deduct such tax and remit it to ZRA. At the
end of every year, employers have to submit annual PAYE tax returns on a
prescribed ZRA form.
Remuneration paid or payable to an expatriate employee for work performed,
carried out or for services rendered in respect of his employment in Zambia are
liable to taxation and should also be subject to the deduction of PAYE. This does
not take into consideration if the remuneration is paid outside of Zambia or is
payable to a person residing outside Zambia.
Value Added Tax
(VAT)
VAT is levied at 16% since 1 April 2008. There are some specified goods and
services are zero-rates or exempt such as basic foods and agricultural products,
exports, medical suppliers and drugs, and hotel accommodation in the Livingstone
district. Every dealer in or supplier of standard rated and zero-rated goods and
services whose taxable turnover exceeds K800,000 per annum is required to
register for VAT, as defined in the VAT Act No. 4 of 1995 . Voluntary registration
is acceptable for dealers whose turnover falls below the stipulated minimum
turnover.
In general VAT returns are required on a monthly basis within 21 days of the
prescribed accounting period unless they have been allowed the option for
extended tax period. Some industries, such as insurance, file their VAT quarterly.
In case of late or failure to submit returns, including nil returns, penalties are
issued. Input VAT can be claimed within a period of three years from the date of
23
the tax invoice or other documentary evidence. If input VAT occurred in the period
prior to the date of VAT registration, it can be claimed within three months.
Taxes on Royalties, Income and Withholding Taxes according to the different
sectors are as following (extract from ZDA Investor Guide Handbook 2009):
Copper
and
Cobalt
Royalty Rate
Profit Tax
rate
Withholding
Tax
Tax burden
relatively high
3%
gross
value
30%
15%
of
Other
Mining
Non
Mining
Farming
and
NonTraditional
Exports
Gemstone
5% of gross
value
35%
n/a
n/a
35% (40%
for banks
with profit
above
200m KW
15%
15%
15%
15%
Mining
Companies
with
Development
Agreement
15%
UNCTAD (2006) compared Zambia’s taxation level with other African countries.
The general system of taxation places Zambia amongst the countries with the
heaviest tax burden. Incentives provided for agriculture and manufacturing reduce
the tax burden and render it comparably better than comparative countries.
However, sector how do not benefits from incentives remain heavily taxed.
4.3
Environment, Physical Planning, Health
& Safety, Consumer Protection
Article 31 of the ZDA Act (2006) obliges any investor to fulfil the national
regulations covering environmental protection, conservation of the nature and
employment.
Physical Planning
Physical Planning is regulated under the Town and Country Planning Act.
Environmental
Legislation
Relevant environmental legislation is the following:
 Mines and Minerals Act Environmental Regulations;
 Act to Amend the Environment Protection and Pollution Control Act;
 Bio Safety Act;
 The Environmental Protection and Pollution Control (Environmental Impact
Assessment) Regulations;
 The Water Supply and Sanitation Act.
Labour Legislation
Relevant legislation on Labour safety, security and labour conditions is as
described above as well as the following act and regulations:





Industrial and Labour relations Act;
Employment Act;
Employment (Special provisions) Act;
Public Health Act;
Medical Examination of Young Persons (Underground Work) Act.
24
Consumer
Protection
The Competition and Consumer Protection Act Nr: 24 of 2010 seeks to protect
consumers´ welfare and interests by ensuring that they have a greater choice on
terms of service, price and quality. The Zambia Competition and Consumer
Protection Commission (CCPC) has furthermore a separate Consumer Complaints
Desk. The development of a separate law and body for consumer protection was
long-time in discussion. A new law is intended to provide better protection against
unfair business practices as well as guidelines for the consumer how to react and
defend himself against such practises..
4.4
Competition Policy & Law
The Competition and Fair TradingConsumer Protection Act 2010was enacted in
2010, came into force in August 2010.. The Act established the Competition and
Consumer Protection Commission) to guard against anticompetitive business/ trade
practices and protect the interest of consumers.
Competition provisions mainly cover four areas namely, restrictive business
practices, mergers and acquisitions, cartels, and lastly abuse of dominant position
of market power. These provisions were there in the Competition and Fair Trading
Act under sections 7, 8, 9, 10 and 11 and there are also in the new Act under Part
III (restrictive business practices), Part IV (mergers), and Part V (Market
Inquiries)..
4.5
Monetary Policy, Foreign Exchange and
Foreign Investors
Monetary Policy
The Government is committed to a flexible exchange rate regime, called
“independently floating” under IMF characteristics. The Zambian Kwacha is freefloating against the major currencies.
Foreign Exchange
Controls
In 1994, Zambia removed all restrictions on conversions of Kwacha into foreign
currencies, as well as restrictions on transferring money into or out of the country
by repealing the Foreign Exchange Control Act. There are no restrictions on the
import of foreign currency or foreign currency dealings. In case of the former, cash
and traveller cheques have to be declared on the Customs Form at the port of entry;
a proof of travellers cheque purchase is needed in case of the later.
Foreign Currency
Accounts
Repatriation of
Profits
The banking system in Zambia allows for bank accounts both in Kwacha and US
Dollar. US$ is the second most common currency in Zambia
The ZDA Act (2006) guarantees in Article 20 that a foreign investor is allowed to
transfer the following funds out of Zambia in foreign currency: (i) dividends or
after-tax income; (ii) principal and interest for any foreign loan; (iii) management
fees, royalties and other charges in respect of any agreement; or (iv) the net
proceeds of sale or liquidation of a business enterprise. Such transfers can be made
after payment of the relevant taxes, notwithstanding any other written law relating
to externalisation of funds.
4.6
Public Procurement
Public Procurement is guided by the Public Procurement Act No. 12 of 2008 and
associated tender regulations and is applicable to government ministries and
departments, parastatal and statutory bodies, and local councils. There is no
25
threshold for international tenders as the authorities believed. Zambia is not a
member of the WTO Agreement on Government Procurement.
4.7
Intellectual Property
Intellectual Property is regulated by the following Acts: Copyright and
Performance Rights Act, Merchandise Marks Act, Patents Act, Trade Marks Act,
Registered Designs Act and the Plant Variety and Seeds Regulations (1997).
4.8
Investment Protection and Dispute
Settlement
After pursuing an extreme nationalisation policy with expropriation of foreign
investment in the 1970s, Zambia engaged in rewrapping its protection legislation
and signed diverse international agreements to re-establish investor confidence.
Today, investor property cannot be expropriated by government, except by act of
parliament in extreme circumstance. In case of expropriation, compensation at
market value needs to be provided.
Constitution of
Zambia
The Constitution of Zambia guarantees in Article 16 the protection from
deprivation of property.
(1) “Except as provided in this Article, no property of any description shall be
compulsorily taken possession of, and no interest in or right over property
of any description shall be compulsorily acquired, unless by or under the
authority of an Act of Parliament which provides for payment of adequate
compensation for the property or interest or right to be taken possession of
or acquired.
(2) Nothing contained in or done under the authority of any law shall be held
to be inconsistent with or in contravention of clause (1) to the extent that it
is shown that such law provides for the taking possession or acquisition of
any property or interest therein or right thereover — (…)
(3) An Act of Parliament such as is referred to in clause (1) shall provide that
in default of agreement, the amount of compensation shall be determined
by a court of competent jurisdiction.”
ZDA Act (2006)
Also the ZDA Act (2006), Article 19, covers investor protection:
(1) “An investor’s property shall not be compulsorily acquired nor shall any
interest in or right over such property be compulsorily acquired except for
public purposes under an Act of Parliament relating to the compulsory
acquisition of property which provides for payment of compensation for
such acquisition.
(2) Any compensation payable under this section shall be made promptly at
the market value and shall be fully transferable at the applicable exchange
rate in the currency in which the investment was originally made, without
deductions for taxes, levies and other duties, except where those are due.”
UNCTAD:
Coverage of
Conditions for
Expropriation
The UNCTAD Investment Policy Review (2006) remarks that, according to
international practices, there are 4 conditions for expropriation: public interest, due
process, non-discrimination, and prompt, adequate and effective compensation.
According to existing legislation in Zambia, three conditions are covered but nondiscrimination is not provided for. Only in one BIT with Germany, all four
conditions are covered. Zambia’s investor protection is good, but UNCTAD
advises to include the non-discrimination condition in Article 19 ZDA Act.
26
MIGA
and
BITs
In addition, a protection against non-commercial risks is given as Zambia is
signatory of the Multilateral Investment Guarantee Agency (MIGA) and the Africa
Trade Insurance Agency. Special Bilateral Investment Protection Agreements, the
BITs, exist with numerous countries (please see list below) which provide
additional guarantees for foreigners. Zambia’s BITs do take account of special
arrangements under regional agreements that give advantages to nationals of third
states.
Dispute Settlement
Article 21 of the ZDA Act (2006) refers to the Arbitration Act No. 19 of 2000 for
the settlement of any dispute arising as a consequence of an investment. This Act
applies to any arbitration agreement to which the State is a party with the exception
of arbitration between the Government of Zambia and a government of a foreign
country, and the Government and any undertaking that is wholly owned or
controlled by the government by a foreign country (unless it is agreed otherwise).
ICSID, UNICTRAL
It states that claimants must first file internal dispute settlement with the Zambian
High Court. If that fails, the parties may chose international arbitration which is
recognized as binding by the State of Zambia. Zambia adheres to the New York
Convention on the Settlement of Investment Disputes between States and Nationals
of other States and is member of the International Centre for the Settlement of
Investment Disputes (ICSID). The procedures for that and those as defined in the
convention are covered in the Investment Disputes Convention Act. Zambia is also
member of the United Nations Commission of International Trade Law
(UNCITRAL).
Arbitration
Alternatives
The Zambian court system has been identified to be overloaded and therefore
inefficient in the resolution of disputes occurring. In order to decongest the courts
and improve the administration of justice in Zambia, the Zambia Centre for
Dispute Resolution (ZCDR) Ltd. was established. It is a non-for-profit organisation
of 16 business and professional organisations operating in Zambia. ZCDR
promotes and popularises arbitration and other alternative dispute resolution
(ADR) methods with the intention to create a conducive environment to foreign
investment. Their main area of activity is: (i) training arbitrators; (ii) conducting
seminars and workshops with professionals and business organisations to promote
the use of alternative dispute resolutions; (ii) providing advice to lawyers and
business persons on drafting of appropriate arbitration agreements and processes
involved, and (iv) providing advice to arbitrators.
4.9
AGOA
International Agreements and
Obligations – Trade and other
Agreements, BITs, DTTs
Zambia has signed the AGOA Treatment with the United States and is granted
preferential market access for textile products.
27
WTO, EBA, etc.
Zambia qualifies for trading under the Everything But Arms (EBA) Agreement and
is member of the WTO. Furthermore, Zambia is member of MIGA and ICSID for
the resolution of international investor disputes.
Regional Integration
Zambia is member of 2 Regional economic initiatives, namely SADC and
COMESA. Zambia hosts the COMESA Secretariat and is highly involved in
progressing regional integration under COMESA.
COMESA
The Common Market for East and Southern Africa (COMESA) has been operating,
in one form or another, since 1981. Economic integration is envisaged to progress
from the Free Trade Area (FTA) to an economic monetary union. The FTA became
operational on 1November 2000 with nine participating countries. The COMESA
FTA is an agreement among members not to apply customs duties or charges on
goods traded amongst them. The eligible goods for duty-free treatment must meet
the agreed upon Rules of Origin. Members also agree to eliminate all non-tariff
barriers to trade between them. The nine member countries that are implementing
zero tariffs are Egypt, Sudan, Kenya, Djibouti, Malawi, Madagascar, Mauritius,
Zambia and Zimbabwe. A COMESA Certificate of Origin is required for each
consignment of goods and is obtained from the Revenue Authority in respective
member countries.
Please see below a list of BITs and DTTs
5
SADC Free Trade
Area
SADC RELATED ISSUES
As member of the SADC group, Zambia has signed the Trade Protocol that is
calling for the implementation of a Free Trade Area. Each member has to negotiate
two reduced tariff schedules. Zambia’s implementation came into effect on 30
April 2001. Due to a delayed tariff reduction to South Africa, the market
experiences a delayed liberalisation. Products of highest sensitivity for Zambia and
with a tariff reduction to zero over 12 years are meat and dairy products, tea, some
flours, raw sugar, cement, textiles and clothing, and motor vehicles. For all goods,
a SADC Certificate of Origin is required which can be obtained from the Zambia
Revenue Authority.
28
Bilateral Investment
Treaties
Bilateral Investment Treaties 1 June 2009
Partner Country
Date of signature
1
2
3
4
5
6
7
8
9
10
11
Double Taxation
Agreements
Belgium
Luxembourg
China
Cuba
Egypt
Finland
France
Germany
Ghana
Italy
Netherlands
Switzerland
and 18-May-01
Date of
into force
-
21-Jun-96
22-Jan-00
28-Apr-00
07-Sep-05
01-Jan-02
10-Dec-66
18-May-01
20-Apr-03
30-Apr-03
03-Aug-94
25-Aug-72
07-Mar-95
Double Taxation Agreements 1 June 2009
Partner Country
Type of Agreement
1
Canada
Income and Capital
2
Denmark
Income and Capital
3
Finland
Income and Capital
4
France
Income and Capital
5
Germany
Income and Capital
6
India
Income and Capital
7
Ireland
Income and Capital
8
Italy
Income and Capital
9
Japan
Income and Capital
10
Kenya
Income and Capital
11
Netherlands
Income and Capital
12
Norway
Income and Capital
13
Poland
Income and Capital
14
South Africa
Income and Capital
15
Sweden
Income and Capital
16
Switzerland
Income and Capital
17
Uganda
Income and Capital
18
United Kingdom
Income and Capital
19
Tanzania,
United Income and Capital
Republic
Entry
Date of Signature
16-Feb-84
13-Sep-73
03-Nov-78
05-Nov-63
13-May-73
05-Jun-81
29-Mar-71
27-Oct-72
19-Feb-70
27-Aug-68
19-Dec-77
14-Jul-71
19-May-95
22-May-56
18-Mar-74
30-May-61
24-Aug-68
22-Mar-72
02-Mar-68
29
Sources included
Bank of Zambia (2010) Website, www.boz.org.zm
CUTS (2003) Investment Policy in Zambia, Performance and Perceptions,
Discussion paper
Government of Zambia: diverse legislation and regulations
Government of Zambia (2006) Fifth National Development Plan 2006-2010
Mwenda, Winnie Sithole (2006) Paradigms of Alternative Dispute Resolution and
Justice Delivery in Zambia, Doctor thesis, submitted to the University of South
Africa, November 2006
Peacebuilding Portal (2010) Zambia Centre for Dispute
http://www.peacebuildingportal.org/index.asp?pgid=9&org=4262
Resolution,
Zambia Development Agency (ZDA) (2013) ZDA Investor Guide Handbook,
February 2013
Zambia Development Agency (2010) ZDA Website including relevant
information, www.zda.org.zm
UNCTAD (2006) Investment Policy Review Zambia
UNCTAD (2006) Blue Book on Best Practices in Investment Promotion and
Facilitation: Zambia
UNCTAD (2010) Bilateral Investment Treaties and Double Taxation Treaties,
http://www.unctad.org/Templates/Page.asp?intItemID=4505&lang=1
World Bank (2010) Doing Business Report 2010, www.doingbusiness.org/
WTO (2009) Trade Policy Review, Review by the Secretariat, Zambia, Revision
Interviews with ZDA; investors, government officials
30