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From January 2020, Businesses in Zambia Will Start Paying Sales Tax On Goods And Services

August 6, 2019

Effective from January 2020, businesses in Zambia would no longer pay tax on goods and services supplied or imported into the country under the old Value Added Tax Act, but will now do so under the new Sales Tax. And this will come at an extra cost.

Here Is What You Need To Know About The New Sales Act

The Sales Tax will replace the current Value Added Tax (VAT) Act.
The Sales Tax Act will apply to the taxable supplies of good and services. Sales Tax will also apply to the taxable importation of goods and services into Zambia.
The rate of tax is 9% for locally supplied goods and services and 16% for imported goods and services. The Minister is empowered to reduce the rate applicable to a taxable supply by Statutory Instrument.
The Act retains most of the principles that applied under the VAT Act with respect to definitions of supplies, goods, and services. It also largely retains the definitions of time of supply and place of supply. As with the current VAT Act, the return filing deadline remains the 18th of each month.

Exemption

Under the Act, the following goods and services are exempted from sales tax:

Capital goods
Inputs
Designated basic and essential goods or services
Designated suppliers to privileged persons
Exports

The Act also empowers the Minister to provide exemptions to Sales Tax by means of Statutory Instrument.

The Significance of The New Sales Tax To Zambian Businesses

This new Act is so significant for Zambian businesses because, under the old VAT system, consumers used to pay 16% regardless of the value chain. Under the Sales tax regime, the longer the value chain, the higher the tax paid.

Here Is An Example

Under the new sales tax regime, if a Zambian manufacturer imports raw materials from South Africa, for instance, he will pay 16% because from the new law, 16% is payable as sales tax on all goods imported into Zambia. However, when he/she sells to a wholesaler, 9% local sales tax will be levied on that sale. Again, when the wholesaler sells to a retailer, 9% will also be levied. Should the retailer also sell to the final consumer, 9% will also be charged as sales tax?

The implication of this is that Zambia’s final consumers — the farmer, villagers, informal sector worker — will be paying 41% tax instead of 16 % VAT previously the case. In the case of certain Zambian workers who are paying under Pay and As You Earn (PAYE) at the top rate of 35%, the total effective tax on their income would now be 76% without taking into account other levies.

The new sales tax has been criticized as being against the social, economic and political good of Zambians.

Zambian government desires to switch over to the new Sales Tax Act because according to the Finance Minister’s budget speech:

“VAT works better when you have an economy that has a strong manufacturing base. But we don’t have it! We are in constant refund and it cannot work now. We have to grow the manufacturing base because that is the sector that needs that support of a VAT refund. Right now, VAT is a subsidy and we are in austerity — we can’t afford subsidies. It is as simple as that.

The VAT system was introduced 23 years ago in 1995 to replace Sales Tax.

For Foreign Investors and Businesses

When the new Zambian Sales Tax Act comes into force in 2020, Zambia will be the only country in Southern African Development Community and possibly in the Common Market for Eastern and Southern Africa region to have a sales tax system and this may influence foreign investors in their decision to locate their companies. The country may likely be less competitive a destination for foreign investors compared to its neighbours.

Why 2020 Is The New Date And The Implication of This For Businesses

The new date for the Sales Tax Act, according to Zambia’s Finance Minister Bwalya Ng’andu is to allow for further refinement of the law.

Addressing parliament, Ng’andu said he was withdrawing the draft law and would re-introduce it in the next session in September, the ministry of finance said in a statement.

“This will allow for sufficient time to address the concerns in the Sales Tax Bill that stakeholders raised,” Ng’andu said.

Since being appointed last month, Ng’andu has sought to mend fences with the miners, with relations deteriorating following tax changes and an ownership dispute over Konkola Copper Mines.

Zambia’s mining industry fiercely opposes the tax.

Zambia is Africa’s second-largest copper producer.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Foreign Nationals In Ethiopia Can Now Set Up Banks And Insurance Business

July 29, 2019

Ethiopia is on course to liberalize its economy. Apart from opening bids for its first-ever privately owned telecom license, foreigners who are not citizens of Ethiopia may soon get a law that would allow them to set up and run insurance services as well as set up microfinance banks.

Here Is The Deal

Two draft bills that aim to restructure the country’s existing business law governing insurance companies and microfinance institutions have been passed by Ethiopian Council of Ministers.
The bills would definitely scale through and be passed into law since they were developed by the National Bank of Ethiopia and endorsed by the Ethiopian Council of Ministers.
What is just remaining is for the Ethiopian House of People’s Representatives, the Ethiopian parliament’s lower house, to which it had been forwarded to, to put its final ratification on it.
Under the new law, all that is needed, among other things, for a foreigner to set an insurance or microfinance business is for the foreigner to be a foreign national of Ethiopia.
This is part of restructuring Ethiopia’s current laws on insurance and microfinance sectors, according to the Ethiopian PM’s office.

The decisions to amend the East African country’s existing business laws governing insurance companies and microfinance institutions were made in line with recent and ongoing “large-scale” reform measures in the sectors, the Ethiopian Prime Minister’s Office revealed in a statement.

Here Is The Change These New Laws Are Bringing To The Table

Article 656 of the Ethiopian Commercial Code provides that the law shall determine the conditions under which physical persons or business organizations may carry on insurance business.
Recourse is however made to other parts of the commercial code and other laws to find out as to who may undertake insurance business and the conditions under which it may be undertaken in Ethiopia.
Accordingly, Article 513 of the commercial code provides that banks and insurance companies cannot be established as private limited companies, i.e., a private limited company cannot engage in banking, insurance or any other business of similar nature.
Similarly, Article 6(1) of the Licensing and Supervision of Insurance Business Pro No 86/1994 provides that no person may engage in the insurance business of any type unless it applies to and acquires a license from the National Bank of Ethiopia for the particular class or classes of insurance.
Furthermore, Article 4(1) and Art 2(3) of the same proclamation provide that such person has to be a share company as defined under Article 304 of the commercial code.
These requirements/conditions in effect prevent foreigners from engaging in the insurance business and foreign banks from opening branches and operating in Ethiopia.
The most probable reason for this position is the need to protect infant domestic insurance companies which do not have the desired financial strength, know-how, and human resources to be able to compete with foreign banks which have the superior capacity in these areas.
The new laws, therefore, are preparing to change all these.
Under the new law, all that is needed, among other things, for a foreigner to set an insurance or microfinance business is for the foreigner to be a foreign national of Ethiopia.

Freeing Up The Economy

Ethiopia has also recently announced that government would no longer be monopolizing its telecom sector. At the moment, there is no MTN, Airtel, Safaricom, Vodafone or any other mobile telecom operator in the East African country of Ethiopia, but that will no longer be the case before this year ends. The country is set to award its first set of telco licenses to multinational mobile companies by the end of 2019.

Before this happens, Ethiopia’s government has continually monopolized the country’s telecom industry. Hence, this is expected to end a state-wide monopoly and open up one of the world’s last major closed telecoms markets.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Equatorial Guinea aims to boost opportunities for African services companies

July 23, 2019

In order to strengthen cooperation amongst African companies, encourage the development of strong African content and promote joint-venture opportunities, Malabo will be hosting the Oil & Gas Meeting Day on October 1-2, 2019. The summit is part of Equatorial Guinea’s Year of Energy and will focus on exploring opportunities and deals amongst services companies, which are central to the development of strong African capabilities across the oil & gas value chain.

The African Energy Chamber (EnergyChamber.org) strongly supports the National Alliance of Hydrocarbons Service Companies (NAHSCO) in the organization of this upcoming Oil & Gas Meeting Day. We invite all our partners, especially national oil companies and public and private services companies, to come to Malabo in October. This will be a key platform for dialogue and deals with international, technology and services companies.

“Equatorial Guinea is rapidly becoming a hub for African service companies, driving a regional approach to local content based on partnerships and oil industry cooperation,” said Nj Ayuk, Executive Chairman at the African Energy Chamber and CEO of the Centurion Law Group.

“The development of a strong African oil services industry is crucial if we want to get value out of our natural resources and create jobs. The way to build African capacities is to work together and create jobs, and we are happy Malabo is bringing everyone together.”

The Oil & Gas Meeting Day will offer opportunities for African services companies to make deals with regional and international partners and drive global transformations within the oil services industry.

More importantly, it will provide a platform to share experiences on local content and advocate for regionalization of local content development within African oil markets. “With this meeting, African services companies and national oil companies have the chance to not only be part of the game but change it to their benefits,” added Nj Ayuk.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.