No matter where you live or where your online business is based — if you have customers in Zambia, you gotta follow Zambian VAT rules. That’s what this guide is for! This guide includes everything you need to know about digital tax laws in Zambia, whether your customers live in Lusaka or Kasama.
Digital Products
First, let’s confirm what you’re trying to sell in Zambia. Are you selling digital products?
A digital product is any product that’s stored, delivered, and used in an electronic format. These are goods or services that the customer receives via email, by downloading them from the Internet, or through logging into a website.
You’re probably consuming and using digital products all day long, whether or not you realize it. Here are some common ones on the market today:
- E-books, images, movies, and videos, whether buying a copy from Shopify or using a service like Netflix. In tax language, these products are in a category usually called, “Audio, visual, or audio-visual products.”
- Downloadable and streaming music, whether buying an MP3 or using a service like SoundCloud or Spotify. Of course, these products also fall in the audio category.
- Cloud-based software and as-a-Service products, such as Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS).
- Websites, site hosting services, and internet service providers.
- Online ads and affiliate marketing. Income from these services can be considered taxable under digital tax policies.
Not sure if what you sell is considered a “digital product?” Check out our explanation of what a digital product is exactly.
Heads up: you might also hear of digital goods referred to as “digital services,” “e-goods”, or “e-services.” All of these terms refer to the same thing.
Zambia’s VAT for digital products
VAT is the consumption tax throughout Zambia, levied on almost everything sold in the country. There are specific rules around digital products, which you must follow closely to stay tax compliant.
If you sell digital products to a customer in Zambia, you must charge the VAT rate. Simple, right?
It’s simple in theory. But in practice, Zambia VAT has a bit more complexity. You don’t necessarily need to add tax to every sale. It can depend on the amount of sales you make in the country, whether the sale is B2B or B2C, and other things. We’ll go into more detail about each of these throughout the rest of the guide!
Registering for Zambia’s VAT
Is there a sales registration threshold?
Yes, Zambia actually has two registration thresholds, one for annual sales and one for quarterly. Non-resident digital services providers are required to register for VAT if their Zambia sales exceed a threshold of ZMW 800,000 per year or ZMW 200,000 per quarter.
What does this mean exactly?
Well, the annual threshold amount refers to your total sales in the country, during any 12-month period. This can be a calculation of sales in the last twelve months, or a prediction of sales in the next twelve months — any rolling year-long period, past or future.
If your total sales in Zambia remain below the threshold amounts, then you don’t need to worry about VAT at all. Phew!
But once your sales do surpass ZMW 800,000 in one year or ZMW 200,000 in one quarter, then you must register for VAT and comply with all of the Zambian rules around tax rate and collection, invoices, and filing returns.
The registration process
So, turns out you do need to register for tax in Zambia. Don’t worry! Just follow these instructions from the Zambian tax authority on how to register for Zambian VAT.
Ultimately, you will receive a VAT registration number, which establishes you in the Zambian tax system as a legal business. This number tracks your business through the system: the taxes you pay, the tax credits you receive, plus the tax you charge from customers.
Do you need a local tax representative?
Yes, Zambia requires that you sign up for VAT through a local tax representative.
Collecting VAT in Zambia
If you sell B2C
Once you’re registered for taxes, you’re expected to charge 16% VAT on every sale to a Zambian resident.
If you sell B2B
If your customer is a fellow business, and they’ve provided a valid VAT number, then adding and collecting tax isn’t necessary! The buyer will handle tax, via Zambia’s reverse-charge mechanism.
VAT invoices in Zambia
In order to comply with tax laws, you should include the following information on your invoices to customers in Zambia:
- Your business’ name and address
- Your business’ VAT registration number
- Invoice date
- Invoice sequencing number
- Buyer’s name and address
- Buyer’s VAT registration number, if they have one.
- VAT (amount and rate) applied to each item
- Final amount after tax is added
- The currency used
Zambian law requires you to keep these invoices and other tax records for 6 years.
The easiest solution for the VAT invoice would be to use a tax software that automatically generates and sends all invoices (as soon as the sale is complete), and also stores them in the cloud for you. Quaderno does just that, but we won’t go on about it here. :)
Filing VAT returns in Zambia
Charging and collecting tax is only the first half of staying compliant. The second, and equally important, half is filing returns and paying whatever you might owe to the government.
In Zambia, foreign businesses are expected to file tax returns every month. You have 18 days to file and pay after the end of each month. So your tax return for April will be due on May 18.
But if you have fewer than 10 transactions during the reporting period, you actually only have 5 days to file! So in this case, your return would be due on May 5.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.