Tax Guide for US Expats Living and Working in Zambia
Who Is Liable For Income Taxes in Zambia
Residents are subject to income tax on income de rived, or deemed to be derived, from a source in Zambia.
Nonresidents are subject to withholding taxes only.
A person who lives and works in Zambia for more than 183 days in a tax year is considered resident for tax purposes.
Income subject to tax
Employment income. All salaries paid and benefits given in consideration for work performed in Zambia, regardless of where paid, are subject to tax in Zambia. Employers are subject to tax on certain benefits they provide, including accommodation and the personal use of a company vehicle.
Self-employment and business income. Any individual who earns income from a source or a deemed source in Zambia is subject to tax for the year in which the income is earned. Partners are subject to tax individually on their respective shares of partnership income.
Business income for tax purposes includes all profits and gains, except capital gains, arising from a business.
Nonresidents are subject to withholding tax at a rate of 15% on income from management and consulting fees.
Directors’ fees. Directors’ fees received from resident companies are included in taxable income.
Investment income. Resident individual shareholders are subject to withholding tax on dividends at a rate of 15%. This is a final tax.
Resident individuals are subject to withholding tax on bank interest at a rate of 15%. This is a final tax.
Nonresidents are subject to withholding tax at a rate of 15% for royalties.
Capital gains. Capital gains tax is not levied in Zambia. However, before property may be transferred, Property Transfer Tax (PTT) is levied at a rate of 5%, effective from 1 April 2011, on the realizable value of property. For purposes of PTT, property consists of land in Zambia, which includes buildings, structures and other improvements, and shares issued by companies incorporated in Zambia.
Deductions
Personal exemption. Individuals are exempt from tax on the first K 12 million of their annual income, effective from 1 April 2011.
Business deductions. Expenses (except capital expenses) incurred in earning taxable income are deductible.
Rates. Effective from 1 April 2011, the following income tax rates apply to individuals.
Relief for losses. Losses may be carried forward for up to five years and deducted from income from a similar source.
B. Estate and gift taxes
Zambia does not impose estate or gift tax.
C. Social security
Zambia does not impose social security taxes.
E. Tax treaties
Zambia has entered into double tax treaties with the following countries.
Belgium
Ireland
South Africa
Canada
Italy
Sweden
Denmark
Japan
Switzerland
Finland
Kenya
Tanzania
France
Netherlands
Uganda
Germany
Norway
United Kingdom
India
Romania
To learn more about the history, culture, economy and other information about Zambia
We have been preparing US income tax returns for US Citizens and permanent residents living in Zambia for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Zambia and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Zambia.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email