Income Tax (Amendment) Act, 2013

2. Section two of the principal Act is amended in subsection ( l) Amendment by the insertion, in the appropri�te 'places, of the following new of section 2 definitions: "branch profits" means the profits of a foreign company derived from the operation of its business within the Republic which are not re-invested in the Republic; "industrial park" has the meaning assigned to it in the Zambia Development Agency Act, 200'6; , "multi- facility economic zone" has the meaning assigned to it · in the Zambia Development Agency Act, 2006; "property loan stock company" mca,is a company listed on the Lusaka Stock Exchange_ whi·:h is involved in real estate investment and development and has a capital structure that consists of property linked units; and Act No. 11 of 2006 Act No. 11 of 2006 , SinKie copies oftlzis Acr may he obtained from the Government Printe,� P.O. Box 30/36. /0/0i Lusaka. Price K 5.00 each. 310 No. 18 of 2013] Income Tax (Amendment) "property linked unit" means a unit comprising a share and a debenture in a company, where the share and debenture are linked together and cannot be disposed ofindependently of each other. Amendment of section 21

3. Section twenty-one of the principal Act is amended by the deletion of subsection {5) and the substitution therefor of the following: (5) Where, upon the termination of the services of an individual in an office or employment, income is received by way of- (a) compensation for loss of office or employment; or (b) repatriation allowance or severance pay, on termination by reason of redundancy, early retirement, normal retirement or death; the first thirty-five thousand K wacha of the total or aggregate income received, as applicable, shall be exempt from income tax.

4. Section forty-six A of the principal Act is amended in the proviso to subsection (I) by the deletion of the words "one thousand nine hundred and twenty Kwacha" and the substitution therefor of the words "the amount specified in subparagraph (c) of paragraph 2 of the Charging Schedule."

5. The principal Act is amended by the insertion, immediately after section forty-eight of the following new section:

48A. (I) Subject to subsection (2), the provisions of this Act shall have effect notwithstanding any obligation as to secrecy or other restriction on the disclosure of information imposed under the Banking and Financial Services Act, the Evidence (Bankers' Books) Act, the. Accountants Act, 2008 and the Legal Practitioners Act in respect of information required by the Commissioner-General for the purposes of this Act. (2) Subsection (I) shall not apply to information received from, or obtained on, a client by a legal practitioner- (a) in the course of ascertaining or receiving instructions from a client; or (b) in defending or representing a client, or conceming judicial, administrative, arbitration or mediation proceedings, including advice on instituting or Amendment of section 46A Insertion of lh::w section 48A Disappliculion of secrecy obligations Cap. 387 Cap. 44 Act No. 13 of2008 Cap. 30 \ , Income Tax (Amendment) [No. 18 of 2013 311 avoiding proceedings, whether such infonnation is received or obtained before, during or after such proceedings.

6. Section sixty-three of the principal Act is amended in sub- Amendment section (!) by the insertion, immediately after paragraph (vii), of of section 63 the following new paragraphs: (viii) income from gaming, lotteries and betting from which tax in respect of that charge year has been deducted under section eighty-two A; and (ix) income from letting of property from which tax in respect of that charge year has been deducted under section eighty-two A.

7. Section seventy-eight of the principal Act is amended in Amendment subsection (I) by the deletion of paragraph (b) and the substitution or section 78 therefor of the following: (b) within the period of the notice of assessment during which the tax asses ;cd is due;

8. Section seventy-nine C of the principal Act is amended by the deletion in subsection ( I) of the words "without registration that may be requi1cci under any law relating to the reg'stration of charges upon laud". Amcndm�:nt of section 79C

9. Section e,ghty-tivo A of the principal Act is amended by- (a) the delctwn of subsection (I) and the substitution there for of'th� following: Amendment of section 82A (1) Subject to the provisions of this section, a person or partnership making a payment of- (a) a management or consultant fee deemed under section eighteen to be from a source within the P:opublic; (v) interest and royalties from a source within or deemed under section eighteen to be within the Republic; (c) rent from a source within the Republic; (d) commissions, other than commissions received by an individual whose income is from employment or office; (e) a public ente11ainment fee to, or on behalf of, a person or persons in partnership not resident in the Republic; 312 No. 18 of 2013] · Income Tcix (Amendment) (f) commission deemed under section eighteen to be from a source within the Republic; or (g) winnings from gaming, lotteries and betting; irrespective of whether the payment is made outside the ��p.ublic shall, before making any other deduction, deduct tax from the payment referred to in paragraphs (a), (b), (c), (d), (e), (I) and (g) at the rate specified in the Charging Schedule or as the Commissioner-General may direct to give effect to the provisions of any agreement made under section seventy-four or the provisions of the Second Schedule. 0 (2) A person or partnership to whom subsection (I) a pplies shall account for tax as if the payment were subject to' Part VI and for the purposes of this subsection, payment shall be deemed to be made when the income is received by the recipient as provided in section fi,'.e, except that - .. (a) this section shall not applyto interest payable on a bill of exchange drawn for one hundred and eighty days or less; (b) the payment of an amount in excess of the original issue-price for any treasury bill or similar financial instrument sold at a discount from face value which shall be deemed for th� purposes of this section to be payment of interest when · the treasury bill or any other similar financial instrument is presented for redemption or rediscount; (c) the Commissioner-General inay determine that the provisions of paragraph (b) or (d) of subsection (I) shall not apply in any paiticular case and shall, in writing, notify the person or partnership concerned that the provisions of paragraph (b) or {d) of subsection ( 1 ), as applicable, shall not apply to such person or partnership to the extent and to the period specified in such notification; and {d) in the case of paragraph (b) of subsection (I), the direction' to be issued under paragraph {c) shall only be for interest arising from a property linked unit of a property loan stock company.; and Income Tax (Amendment) [No. 18 of 2013 313 (b) the re-numbering of ofsubsections (2), (3), ( 4), (5), (6), (7) and (8) as subsections (3), (4). (5), (6), (7), (8) and (9) respectively. I 0. Section ninety-five of the principal Act is amended by the insertion, immediately after subsection (3), of the following new subsection: Amendment ofseclion 95 (4) For the purposes of determining liability to tax under subsection(!), the Commissioner-General may- (a) re-cliaracterisc a transaction or an element of a transaction that was entered into as a lax avoidance scheme; and (b} re-characterise a transaction the form of which does not reflect the substance.

11. Section ninety-seven A of the principal Act is amended by the deletion of subsection (2) and the substitutio'n the�efor of the following: Amendment of section 97A ; (2) This section shall apply where a taxpayer engages in one or more commercial or financial transactions with an associated person and the actual conditions made or imposed . in that transaction or transactions are different from the ann's length conditions and there is, except for this section, a reduction in amount of income taken into account in computing the income of one of the associated· persons referred to in subsection ( 1 ), in this section referred to as "the first taxpayer," chargeable to tax for a charge year, in this section referred to as "the income year".

12. Section ninety-seven C of the principal Act is amended by the deletion of subsections (4) to (7) and the substitution therefor of the following: Amendment of section 97C ( 4) For the purposes of section ninety-seven A and ninety­ seven B, a person is associated with another if- (a/ the person participates directly or indirectly in the management, control or capital of the other; or (b) the persons participate clirectly or indirectly in the management, control or capital of both of them. (5) For the purposes of section ninety-seven A and ninety­ seven B, where conditions are made or imposed between associated persons in their commercial or financial relations- 314 No. 18 of 2013) ,. J11co111e Tax (Ame11dment) (a) it shall be assumed, unless the contrary is shown to the satisfaction of the Commissioner-Genera·!, that different conditions or no conditions would have been imposed if those persons were not associated; and (b) where a claim is made ur,der subsection (4) of section 11inety-seven A. it shall be for the claimant to p ·,we ihat the claim satisfies thal subsection. (6) The Mi111stcr may, by statutory instrument, p�escribe- (a) I '1e direct and indirect participation in the ma11agement, control or capital vf a person and dift:rent provision that may be made in relation to diffc ent cases or different classes of each case; (b) the , etermination of whether the conditions of a control. ·ad transaction under subsection (3) of section ninety-st ven A arc consistent with the arm's length · condition. and ihe quantum of any adjustment made to the inco,· c of the first person or the second person in relation to ··ubsectiors (3) and (4) of section 11i11ety­ seve11 A; and (c) documentation :·ules 111 relation to section 11i11ety­ seve11 A that speci,:1 the information and documents required to be kept L':' a person in relation to section ninety-seven A and pe. nlties for non-c�mpliance of the Regulations. (7) Regulations under this secti.'n may crc�te offences punishable with a fine not exceeding •.�n thous,, ,cl pePalty units for a failure to comply with the provisior,· �f the Regulations.

13. The First Schedule to the principal Act is ame,,c ·d by the-­ (a) deletion of paragraph 8 and the substitution th,, ,for ot the following: (8) Income includes the difference between the market value of the shares at the date of exercise of the share options and the option price or the gross sale proceeds or proceeds from sale of options in respect of shares allotted, reserved, vested or acquired by an individual in terms of a share option scheme net of any amount paid for the acquisition or exercise of the shares or options by the individual concerned, and shares or options sold shall be deemed to be the shares or options longest held, except that the relief afforded by subsection (5) of section Amcndmcnl of First Schedule Income Tax (A111endme11t) [No. 18 of 2013 315 twenty-011e shall extend to such income to the extent not absorbed by compensation received for loss of office or employment where the gross sale proceeds are receivable within one year of termination of services.; and (b) insertion, immediately after paragraph 9, of the following new paragraph: ( I 0) Income includes benefits arising from gaming, betting and lottery winnings. · 14. The Second Schedule to the principal Act is amended by Amendment the- of Second Schedule (a) insertion, immediately after clause (b) of sub-paragraph (2) of paragraph 5, of the following new clause: (c) Millennium Challenge Account Zambia (MCA­ Zambia) and any implementing entity appointed under the Millennium Challenge Compact Act, Act No. 6 ol' 20 1 3 ; and 2013 (b) deletion in paragraph 7, of clauses (p), (u) and (aa).

15. The Fifth Schedule to the principal Act is amended in paragraph 4A by the insertion immediately after the words "person operating in" of the words "a priority sector or in respect of a priority product".

16. The Charging Schedule to the principal Act is amended by the- (a) deletion in sub-paragraph ( I ) of paragraph 2 in- Amendment of Fifth Schedule Amendment of Charging Schedule (i) item (c ) of the words "twenty-six thousand four hundred kwacha" and the substitution therefor of the words "thirty-six thousand kwacha"; (ii) item (d) of the words"twenty-six thousand four hundred kwacha" and "thirty-six thousand kwacha" and the substitution therefor of the words "thirty-six thousand kwacha" and "fotty­ five thousand six hundred kwacha", respectively; and (iii) item (e ) of the words "thirty-six thousand kwacha" and the substitution therefor of the words "forty- five thousand six hundred kwacha"; 316 No. 18 of 2013] lnc o11;e Tax (Amendment} (h ) deletion of clauses (e), (/) and (g) in paragraph 5 and the substitution therefor of the following: . (e) on the income of a rural business .enterprise or business enterprise in a priority sector operating in a multifacility economic zone or an industrial park tax shall be charged at zero percent for a period of five years stf)rting from the year of commencement of operations of the approved investment; (I) tax to be deducted from any dividend declared by a rural business enterprise or business enterprise in a priority sector operating in a multifacility economic zone or an industrial park shall be at the rate of zero percent per annum for a period of five years starting from the year o f commencement 9f operations of the approved investment; (c ) deletion of sub-paragraph (1) of paragraph 6 and the substitution therefor of the following: (1) Tax required to be deducted from any pay- ment made under .section eighty- one and section eighty- one A shall be deducted at- · · (a) the rate of· fifteen percent for dividends; (b). the rate of twenty percei1t f o r payments to non-resident contractors; (c) such'other rate as the Commissioner­ Gei1eral directs to give· effect to the provisions of any agreement made under section seventy-four or to give effect to any provision .in the Second Schedule; or . (d) the rate of zero percent per annum for any dividends paid by any person canying on mining operations.; Tax on profil distributions (d) insertion, immediately after paragraph 6, of the following new paragraph:

6A. Tax required to be deducted from a payment <,r distribution of branch profits shall be at the r,1te of fifteen percent.; and ,, •j - . Income Tax (Amendment) [No. 18 of 2013 317 (e) insertion in the proviso to paragraph 7 of the following new clauses: (vi) ta.x required to be deducted from the payment of commissions to a non-resident deemed under section eighteen to be from a source within the Republic shall be at the rate of twenty percent; (vii) tax required to be deducted from the payment of public entertainment fees shall be at the rate of twenty percent; (viii) tax required to be deducted from the payment of winnings from gaming, lotteries and betting shall be at the rate of twenty percent; and (ix) tax required to be deducted from the payment of rent shall be at the rate of ten percent. 318