Zambia: VAT on cross-border provision of digital services

The Zambian tax authority on 23 February 2024 published the Value Added Tax (Cross Border Electronic Services) Regulations, 2024, which require non-resident digital services providers to register for, collect, and remit value added tax (VAT) using a simplified registration system.

Background

Historically, Zambia required non-resident digital services providers to appoint a local tax agent to comply with their VAT obligations. However, due to lack of clarity of this VAT obligation, Zambia amended under the Finance 2024 the VAT obligations for non-resident digital services providers. Read TaxNewsFlash

The tax authority is expected to issue further guidance regarding the implementation of the rules. 

Scope

The regulations define digital services as services provided or delivered on or through the internet, an electronic, or a digital network. The regulations provide the following examples:

• Streaming services including films, television shows, music, games, sporting, political, cultural, artistic, scientific, and entertainment events, video on demand, and podcasts
• Software services, including software drivers, website filters, firewalls, virtual private network services, banner blockers, and the provision of after-sale services at a consideration, software updates, software version upgrades, and other software support services
• Downloadable digital content including computer and mobile applications, electronic books, films, television shows, music, games, podcasts, images, and text
• Website related services, including website supply, web hosting, remote maintenance of programs and equipment
• Subscription-based media including news services, magazines, weather or travel reports, and virtual playgrounds
• Search engines and automated helpdesk services, including customizable search engine services
• Electronic data management services, including online warehousing, file sharing, and cloud storage services
• Online presence services, including advertising services and services providing or supporting a business or personal presence on an electronic network such as a website or a webpage
• Ticketing services for events, theatres, restaurants, and similar services
• Online market services linking the supplier to the customer including the right to put goods or services up for sale on an online market
• Data monetization including sales, licensing or any other form of monetizing data generated from a user's activities

The regulations further clarify that the following are not considered digital services:

• Broadcasting and telecommunication services
• Physical media including read-only memory compact disk, floppy disks, and similar tangible media
• Physical audio or video media including compact disks, audio cassettes, video cassettes, and digital video disks
• Physical game media such as games on a read-only memory compact disk
• Professional services such as advice given by lawyers and financial consultants to clients by electronic mail

Customer location

The regulations do not provide any information in this regard. However, it is expected that this will be provided in pending guidance.

B2B v. B2C

Non-resident digital services providers are required to account for VAT for both business-to-business (B2B) and business-to-consumer (B2C) B2C sales.

Marketplace rules

The regulations do not provide any information in this regard. However, it is expected that this will be provided in pending guidance.

Registration

Non-resident digital services providers are required to register if they exceed a threshold of ZMW 800,000 per annum or ZMW 200,000 per quarter for sales arising from Zambia. The registration can be done through the dedicated online portal. 

VAT invoicing

The regulations provide for the issuance of a “simplified invoice” but not provide invoicing requirements besides the requirement that invoices should be in Zambian Kwacha converted using the exchange rate provided by the tax authority as determined by the Bank of Zambia. Other invoicing requirements are pending further guidance from the tax authority. 

Penalties

The standard penalty provisions in the tax code apply.

For more information, contact a KPMG tax professional:

Philippe Stephanny | philippestephanny@kpmg.com

Chinedu Nwachukwu | chinedunwachukwu@kpmg.com