Taxes are a crucial part of running any business or earning income in Zambia. One of the most common and sometimes misunderstood types of tax is Withholding Tax (WHT). Whether you’re an individual freelancer, contractor, or a registered company, understanding how withholding tax works helps you stay compliant and avoid unnecessary penalties.
This guide explains what withholding tax is, how it’s applied, who is responsible for deducting and remitting it, and the current rates set by the Zambia Revenue Authority (ZRA).
1. What is Withholding Tax?
Withholding tax is a tax deducted at source — meaning it’s taken from certain payments before the recipient receives the money.
In simple terms, when a person or business makes a payment for specified goods or services, a percentage of that payment is withheld and paid directly to the Zambia Revenue Authority on behalf of the recipient.
For example, if a company pays a consultant K10,000 for services and the withholding tax rate is 10%, the company must withhold K1,000 and remit it to ZRA. The consultant receives the remaining K9,000 but can use the K1,000 withheld as a tax credit in their income tax return.
2. The Purpose of Withholding Tax
The main purpose of withholding tax is to:
- Ensure timely collection of tax revenue for the government.
- Reduce tax evasion by collecting taxes at the point of payment.
- Simplify compliance — since the payer deducts and remits on behalf of the payee.
- Encourage accountability, especially in payments made to non-resident entities.
By collecting tax upfront, ZRA ensures that everyone contributing to the economy also contributes to national revenue fairly.
3. Who Is Responsible for Withholding and Paying the Tax?
In Zambia, the payer (the person or company making the payment) is responsible for deducting and remitting withholding tax to the Zambia Revenue Authority.
The recipient (the person or business receiving payment) is the one from whose income the tax is withheld.
Example:
- If a company hires a consultant, the company must deduct withholding tax.
- If a landlord rents property to a business, the tenant (business) must withhold the required tax on rent.
Failure to withhold or remit tax within the required period can result in penalties and interest from ZRA.
4. Common Payments Subject to Withholding Tax in Zambia
Withholding tax applies to specific types of income, both for residents and non-residents. Below are the most common categories:
| Type of Payment | Resident Rate | Non-Resident Rate |
| Dividends | 15% | 15% |
| Interest (from banks, savings, or loans) | 15% | 15% |
| Rent (land, buildings, equipment) | 10% | 10% |
| Management and Consultancy Fees | 15% | 20% |
| Royalties | 15% | 20% |
| Commissions | 15% | 20% |
| Payments to Non-Resident Contractors | — | 20% |
| Public Entertainment Fees (non-residents) | — | 20% |
Note: These rates are set by ZRA and may change with annual budgets. Always verify the latest rates from the Zambia Revenue Authority before making payments.
5. How to Calculate Withholding Tax
Withholding tax is calculated as a percentage of the gross amount payable.
Example 1: Resident Consultant
- Gross fee: K10,000
- Withholding tax rate: 15%
- Tax withheld: K1,500
- Net payment to consultant: K8,500
Example 2: Rent Payment
- Monthly rent: K5,000
- WHT rate: 10%
- Amount withheld: K500
- Amount paid to landlord: K4,500
The withheld amount must be remitted to ZRA by the 14th of the month following the month in which payment was made.
6. Filing and Remitting Withholding Tax to ZRA
Businesses or individuals who withhold tax must:
- Deduct the correct tax amount at the time of payment.
- Remit the withheld tax to the Zambia Revenue Authority (ZRA) by the 14th of the following month.
- Submit a withholding tax return showing details of the payment, tax amount, and the payee’s information.
- Provide a Withholding Tax Certificate to the payee as proof of tax deduction.
These records help both the payer and the payee reconcile their tax obligations during the annual return filing.
7. Withholding Tax Certificates and Credits
After withholding and remitting tax, the payer must issue a Withholding Tax Certificate (Form WHT 3) to the recipient.
This certificate serves as:
- Proof that tax was deducted and paid to ZRA.
- Evidence for the recipient to claim the tax as a credit when filing annual income tax returns.
For example, if you had K1,000 withheld on consulting income, you can deduct that amount from your total tax liability at year-end.
8. Exemptions from Withholding Tax
Not all payments are subject to withholding tax. Certain exemptions apply to:
- Payments made to government ministries or departments.
- Payments to approved charitable organizations.
- Certain interest payments under government bonds or treasury bills.
- Payments under specific tax treaties where Zambia has agreements to avoid double taxation.
Businesses should always confirm exemption status with ZRA before skipping any withholding deduction.
9. Penalties for Non-Compliance
Failing to deduct or remit withholding tax can result in serious penalties.
ZRA may impose:
- Interest on the unpaid amount for each month or part thereof.
- Penalties for late filing or false declarations.
- Prosecution in cases of deliberate evasion.
To avoid penalties, always ensure timely remittance and accurate record-keeping.
10. Why Withholding Tax Compliance Matters
For businesses, compliance with withholding tax laws demonstrates credibility and financial integrity. Many corporate clients, tenders, and government contracts in Zambia require tax clearance — and failure to comply can disqualify you.
For individuals, proper withholding ensures your tax record remains clean and that you avoid unexpected bills or penalties later on.
In essence, withholding tax compliance helps:
- Avoid fines and interest.
- Strengthen business reputation.
- Simplify year-end tax filing.
- Contribute fairly to Zambia’s development.
Conclusion
Withholding tax is an essential part of Zambia’s taxation system. It ensures fair, timely, and efficient collection of taxes from a wide range of incomes. For both businesses and individuals, understanding how it works — and staying compliant — can save you time, money, and legal trouble.
To summarize:
- The payer deducts and remits tax to ZRA.
- The recipient gets a certificate and can claim credit.
- Always remit by the 14th of the following month.
- Keep accurate records and stay updated with ZRA rate changes.
By making withholding tax compliance a standard business practice, you’ll not only avoid penalties but also strengthen your financial foundation in Zambia’s competitive economy.
