One of my clients does a lot of work in Zambia they are a registered company in South Africa. On Zambia side they automatically deduct a 20% withholding tax on all their invoices. Can the client claim this back or how does this work?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
It is outside the scope of the service provided by usto provide advice. We also don’t provide guidance with respect to foreign taxes. The tax withheld in Zambia is 20% (in respect of services rendered in Zambia). You can find more details on the Zambia Revenue’s website at the following link: https://www.zra.org.zm/commonHomePage.htm?viewName=WithholdingTax
The following comments are however made as they may be relevant to your request:
Management or consultancy fee means “payment in any form, other than an emolument, for or in respect of any creation, design, development, installation and maintenance of any information technology or solution, programme or system, administrative, consultative, managerial, technical or consultative or any service of a like nature”.
It should be noted that withholding tax is deductible from payments to a payee who is not in business in Zambia but renders a service to a person carrying on business in Zambia. It does not matter whether the service is rendered in Zambia or not.
The rate of withholding tax is 20%.
The double tax agreement doesn’t provide any relief, other than to provide that the RSA must give a credit for the foreign tax. This was done.
If the services are rendered in Zambia, the section 6quat rebate will be available in respect of the foreign tax withheld at source. SARS’s interpretation note 18 explains this well.