Zambia implemented comprehensive tax reforms through its 2025 Supplementary Budget and the 2026 National Budget. These reforms reflected a deliberate policy shift toward strengthening domestic revenue collection, improving tax compliance, and aligning the tax framework with international best practices.
A central development is the introduction of the Minimum Alternative Tax (MAT) at a rate of 1% of turnover for companies and partnerships. The measure ensures entities contribute a minimum level of tax even where they report low or no taxable income. However, MAT paid is creditable against future corporate income tax liabilities mitigating the risk of double taxation while broadening the tax base and addressing profit-shifting risks.
In addition, the permanent Voluntary Disclosure Programme (VDP) under Section 91A of the Income Tax Act, effective 1 January 2026 was introduced, which allows taxpayers to disclose errors or omissions before detection by the Zambia Revenue Authority (ZRA) in exchange for a full waiver of penalties. This marked a shift toward cooperative tax administration by incentivising early compliance, in the context of increasing global tax transparency and information exchange.
The corporate tax regime was also strengthened through interest deduction limitations, restricting deductible interest to 30% of tax EBITDA, aligning with global anti–base erosion and profit shifting (BEPS) measures, applying to both related-party and third-party financing. In parallel, the introduction of an anti-fragmentation rule for permanent establishments targets multinational enterprises that artificially split operations to avoid creating a taxable presence in Zambia.
Administrative reforms included a reduction in late payment penalties to 0.5% per month, easing the cost of non-compliance while maintaining an incentive for timely payment. Sector-specific changes were also significant. Mining and mineral processing companies are now permitted to maintain accounting records in foreign currency where at least 75% of income is earned in foreign exchange. This reform reduces exchange rate distortions and better reflects the operational realities of export-oriented businesses.
On indirect taxes, the VAT framework was strengthened through expanded provisions for remission of irrecoverable VAT debts, including cases of insolvency and long-outstanding liabilities. This improved administrative efficiency and enable taxpayers to resolve legacy exposures.
Further reforms included widened Property Transfer Tax (PTT) relief for qualifying group reorganisations, facilitating legitimate corporate restructuring without unnecessary tax costs. In addition, reforms in the betting and gaming sector have shifted taxation from income-based approaches to transaction-based levies, improving revenue predictability and compliance.
Overall, recent tax reforms in Zambia reflect a balanced approach that broadens the tax base, enhances transparency, and maintains targeted investment incentives. Their effectiveness will depend on consistent implementation, administrative clarity and proactive engagement by taxpayers.
