The recent changes to Zambia’s Turnover Tax (TOT) regime are set to have widespread implications for businesses, particularly small and medium enterprises (SMEs). The Zambia Revenue Authority (ZRA) has increased the Turnover Tax rate from 4% to 5% and expanded the threshold from K800,000 to K5 million. These adjustments mark a significant shift in the country’s tax framework and will affect how businesses operate and manage their tax obligations.
AmCham’s Advocacy Efforts and Member Feedback
Recognizing the potential effects of these changes, the American Chamber of Commerce in Zambia (AmCham) conducted a survey to gather insights from affected businesses. The findings highlight key concerns among members:
- A legal firm in the business service sector with K2M – K5M turnover reported that the changes will significantly impact their business by increasing tax burdens and reducing profitability. Their response emphasized that TOT should be revised.
- A consulting firm with K2M – K5M turnover voiced concerns about reduced profitability and reinvestment difficulties, stating that the changes may hinder SME growth. They called for advocacy efforts and direct engagement with ZRA.
- An agriculture business with K800,000 – K2M turnover warned that many SMEs could close down, as the tax now applies even to businesses operating at a loss. They emphasized the need for policy changes to protect struggling businesses in this sector.
- A technology company above K5M turnover noted no major impact on their operations but supported advocacy for policy adjustments.
- Another business service company with K2M – K5M turnover cited the increased tax burden means an increase in prices of goods and services, reduced profitability, and difficulty reinvesting in business growth as major challenges. They expressed the need for clarifications on SME taxation.
Based on the survey responses, AmCham is committed to advocating for a more balanced tax regime that considers the challenges faced by SMEs. Key recommendations include:
- Engaging the ZRA and Ministry of Finance to explore possible policy adjustments that allow businesses to deduct operational expenses.
- Hosting tax compliance workshops to educate members on strategic tax planning.
- Facilitating direct discussions with ZRA to address sector-specific concerns and provide clarity on tax classifications.
The recent adjustments to Turnover Tax present both challenges and opportunities. While the government aims to increase revenue collection and simplify tax compliance, businesses must navigate the implications carefully. Through collaboration, advocacy, and proactive tax planning, businesses can work towards mitigating negative impacts while ensuring continued growth and sustainability in Zambia’s evolving economic landscape.