Z A M B I A

1 P O L I C Y , P L A N S A N D P R I O R I T I E S

At the heart of Zambia’s strategic economic development lies the National Vision 2030 in which long-term development objectives are defined. The National Vision is “to become a prosperous middle income country by the year 2030.” This aim is planned to be reached by meeting several development goals, such as: (a) reaching middle-income status; (b) significantly reducing hunger and poverty; and (c) fostering a competitive and outward-oriented economy. Based on that, the Sixth National Development Plan (SNDP) targets the development path for the period 2011 – 2015 under the theme: “Sustained economic growth and poverty reduction”. Thus, the strategic focus of the SNDP is “infrastructure and human development”.

Economic development since 1999 brought an unsatisfying reduction of poverty due to growth generated mainly in urban-based sectors and capital intensive industries. These sectors did not generate sufficient employment as they showed only weak linkages to the national economy. Therefore, focus is guided by the principles of accountability, decentralization and efficient resource allocation.The objectives of the SNDP are to: accelerate infrastructure development; economic growth and diversification; promote rural investment and accelerate poverty reduction and enhance human development. While recognizing the importance of balanced growth in all sectors of the economy, the SNDP priority growth sectors are Agriculture, Livestock and Fisheries, Mining, Tourism, Manufacturing and Commerce and Trade.

The strategic importance of Good Governance has been identified and initiated the process of reviewing the Constitution of the Republic of Zambia in 2005. This process is still ongoing and aims at reflecting adequately the principles of Good Governance in the legal context (which is the separation of the three organs of state). This process already resulted in an Amendment to the Constitution, the Constitution of Zambia (Amendment) Act, 2009, which specifies timely restrictions and processes for determining the annual national budget.

2 I N V E S T M E N T P R O M O T I O N

2 . 1 I n s t i t u t i o n s

The Zambian Development Agency (ZDA) was established in 2006 by the Zambian Development Agency Act and became operational in January 2007. This Act of Parliament merged 5 previously existing institutions (Zambian Investment Centre (ZIC), the Zambia Privatization Agency (ZPA), Export Boards of Zambia (EBZ), Small Enterprise Development Board (SEDB) and Zambia Export

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Vision 2030

Sixth National Development Plan

Sectors of national interestGood GovernanceZDA

Processing Zones Authorities (ZEPZA) into one statutory body. ZDA is therefore not only fulfilling functions of an Investment Promotion Agency, but it is also responsible for the promotion of exports, small business development and continued privatization of state-owned enterprises. This is reflected in a multitude of functions ZDA has to comply with according to Article 5, ZDA Act (2006) (please see Act for further specifications). The overall aim of ZDA is to further economic development of Zambia by promoting efficiency, investment and competitiveness in business and promoting exports from Zambia. ZDA operates under the Ministry of FinanceCommerce, Trade and Industry. ZDA has also about 56 regional offices.

ZDA and its ZDA Act (2006) is in charge of all investors and investments in the country and any industry, except (a) industries manufacturing arms and ammunition, explosives, military vehicles and equipment, aircraft and any other military hardware; (b) an industry manufacturing poisons, narcotics, dangerous drugs and toxic, hazardous and carcinogenic materials; and (c) an industry producing currency, coins and security documents.

ZDA provides additional facilitation services to to registered investors which cover: Acquisition of land; Obtaining water, electric power, transport, and communication services and

facilitation for the investments; Regularizing their immigration status; Acquiring other licenses required to operate a business in any particular sector; Access any other after care assistance that may be required.

The Bank of Zambia in its current form and function was established by the Bank of Zambia Act, 1985. With the change of government in 1991, government priorities changed and the macroeconomic management in Zambia. Consequently, emphasis was geared towards creating a stable macroeconomic environment as a prelude to sustainable economic growth since 1992. The new focus was now on price stability and on ensuring a sound financial system which was expressed in a new legal text, the Bank of Zambia Act, 1996.

This act states, accordingly, the main function of the Bank of Zambia is to formulate and implement monetary and supervisory policies that will ensure the maintenance of price and financial systems to promote a balances macro-economic development. The Board of Directors of the Bank are responsible for the formulation of the policy. The Board consists of the Chairman which is the Governor of the Bank, appointed by the President, and up to 6 other individuals that are not official or employees of the Bank, appointed by the Minister of Finance. The Secretary to the Treasury in the Ministry shall be allowed to attend any meeting of the Board but without any right of vote, nor fulfil the purpose of quorum.

2 . 2 I n v e s t m e n t a n d E x p o r t I n c e n t i v e s

The ZDA Act (2006) provides a wide range of incentives in form of allowances, exceptions and concessions depending on size, sector and location of the investment. A categorisation of investors (as described above) sets the different incentives provided. The general incentives to investors are prescribed in the

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Bank of ZambiaGeneral Incentives

Customs and Excise Act, Income Tax Act and Value Added Tax Act. They provide fiscal incentives which are falling under the Zambia Revenue Authority.

In terms of customs duty, most capital equipment attracts duty rates of 0 to 5 %. Under the Duty Draw Back Scheme another relief is granted if the following conditions are met:

The company or individual must be in the manufacturing business The company or individual must be an exporter or intends to start exporting The company must be in any sector other than the mining sector.

Besides the numerous tax incentives, the ZDA Act also provides for non –fiscal incentives. Investors, who invest at least US$250,000 and employ not less than 200 local persons, are entitled to a self employment permit and employment permits for up to five (5) expatriates.

2 . 3 E P Z s , F r e e p o r t s a n d o t h e r S p e c i a l E c o n o m i c Z o n e s

The ZDA Act, Article 3 and 18, defines a “multi-facility economic zone” as being an area or premise in Zambia that has been declared a MFEZ by the Minister of Commerce, Trade and Industries with the approval of the Cabinet by statutory instrument. The license specifies the limits of the area, the facilities that need to be provided, terms and conditions under which the produced goods and services may be sold, exported or otherwise disposed of, declare activities prohibited within the zone, conditions under which the goods may be removed from the zone, the powers and obligations of the investors, and any other matters necessary for the effective and efficient operation of the MFEZ. The main objective is to attract industrial and economic development by increasing activity in the manufacturing sector. MFEZs are intended for both domestic and export-oriented activities in contrast to export processing zones.

An investor wanting to establish a Multi-Facility Economic Zone or operate in an existing MFEZ is required to meet the following criteria:

Be a registered company under Zambian law Invest not less than the equivalent of US$500,000 Be in a MFEZ priority sector, and Meet the approval of the ZDA, and in case of an MFEZ establishment, the

Cabinet, demonstrating that the investment will provide the following benefits:

o Attract foreign and local direct and indirect investmento Specify the amount and quality of local employment creationo Specify the extend of skills development and skill transfer to local

entrepreneurs and communities, and to social developmento Demonstrate the extent to which the project will lead to expansion

of local productiono Specify the level of utilisation of local raw materials and

intermediate goodso Specify the introduction and transfer of technology

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Duty Draw Back SchemeNon-fiscal IncentivesMulti Facility Economic ZoneQualification Criteria for a MFEZ

o State to which extent the project will lead to a diversification of the economy and which new products will be produced

o State the extent to which the project leads to import substitution and to which degree the project is export oriented

o Specify to which extent the project will lead to increased foreign exchange earnings

o State to which extent the project leads to utilization of preferential trade agreements

o Specify the impact the proposed investment is likely to have on the environment and, where necessary, adequate measures shall be taken to deal with adverse environmental consequences in accordance with the Zambia Environmental Management Act.

An investor in a MFEZ is obliged to provide and maintain standard infrastructure such as facilities, factory building, warehouse, factory space, telecommunication, water sewerage net works, internal roads, uninterrupted power supply source, waste water treatment and other such facilities required for the effective and efficient operations of the MFEZ. All obligations and regulations in regard to MFEZ are specified in the Multi Facility Economic Zones (General) Regulations, 2006. Permits to establish a MFEZ and licenses for working in an MFEZ are proceeded via ZDA.

The priority sectors for MFEZs are outlined in the ZDA Act as well as Statutory Instrument No. 27 of 2007 Zambia Development Agency (Multi-facility Economic Zones) (Priority Sectors) (Declaration) Order, 2007 and Statutory Instrument No. 6 of 2008 “The Zambia Development Agency (Multi-facility Economic Zones) (Priority Sectors) (Declaration) Order, 2008. They are the following:

(a) Information and Communication Technology (ICT)i. Development of computer software

ii. Assembly/manufacture of ICT equipment(b) Health

i. Manufacture of pharmaceutical products;ii. Repair and maintenance of medical equipment;

iii. Provision of laundry services to medical institutions;iv. Ambulance services;v. Medical laboratory services;

vi. Diagnostic services; andvii. Other medical services.

(c) Education and skills training(d) Manufacture of:

i. Machinery & machinery componentsii. Iron & steel products

iii. Electrical and electronic products & components & parts thereof;iv. Chemicals & petrochemicalsv. Pharmaceutical & related products

vi. Wood & wood productsvii. Palm oil & their derivatives

viii. Pulp, paper & paper boardix. Textile & textile productsx. Transport equipment, component & accessories

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Investor ObligationsMFEZ Priority Sectors

xi.

Clay-based, sand-based & other non-metallic mineral products;xii. Plastic products

xiii. Professional medical, scientific, & measuring devices/partsxiv. Rubber productsxv. Leather & leather products

xvi. Packaging & printing materialsxvii. Fertilizer

xviii. Cement(e) Tourism(f) Processing of:

i. agricultural productsii. forest products

iii. non-ferrous metals & their productsiv. gemstones

There are two established economic zones and one industrial park. One economic zone is in Chambishi in the Copperbelt area developed by the Zambia China Economic and Trade Cooperation Zone (ZCCZ). The second one is the government owned Lusaka South Multi Facility Economic Zone (LS-MFEZ Limited) established as a Special Purpose Vehicle. The Industrial Park is the privately owned Roma Industrial Park in Lusaka.

The MFEZs provide special incentives for investors that are in addition to the general incentives:

Zero percent tax rate on dividends for 5 years from year of first declaration of dividends.

Zero percent tax on profits for 5 years from date of commencement of operations, for year 6 to 8, only 50 percent of profits are taxable and years 9 & 10, only 75 percent of profits are taxable.

Zero percent import duty rate capital goods, machinery for five years. Deferment of VAT on machinery and equipment including trucks and

specialized motor vehicles.

2 . 4 T a x I n c e n t i v e s

The main general tax incentives include incentives for income tax, Value-added Tax (VAT), and Customs Duties which are covered by the respective Acts.

There is a multitude of general income tax incentives as described in the ZDA Investor Guide Handbook (2011):

1. Income earned by companies in the first year of listing on the Lusaka stock exchange qualifies for a 2% discount on the applicable company tax rate in the particular sector, however companies with more than 1/3 of their shareholding in the hands of Zambians qualify for a 7% discount;

2. Implements, machinery and plant used for farming, manufacturing or tourism qualify for wear and tear allowance of 50% of the cost per year in the first two years;

3. Building used for manufacturing, mining or hotel qualify for wear and tear allowance of 10% of cost in first year and 5% of cost per year in subsequent years;

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MFEZ IncentivesIncome Tax

4. Duty free importation of most capital equipment for the mining and agriculture sectors;

5. Corporation tax at 10% on income from:a) farming;b) fertilizer production;c) non-traditional exports;

6. Farm works allowance of 100% of expenditure on stumping, clearing, prevention of soil erosion, bore holes, aerial and geophysical surveys and water conservation; and

7. Development allowance of 10% of the cost of capital expenditure on growing of coffee, banana plants, citrus fruits or similar plants.

8. Farm improvement allowance - capital expenditure incurred on farm improvement is allowable in the year of incurring the expenditure.

9. Dividends paid out of farming profits are exempt for the first five years the distributing company commences business.

10. Initial allowance of 10% on capital expenditure incurred on the construction or improvement of an industrial building is deductible;

11. Foreign exchange losses of a capital nature incurred on borrowings used for the building and construction of an industrial or commercial building are tax deductible.

12. Dividends declared by companies assembling motor vehicles, motor cycles and bicycles are exempt for the first five years of initial declaration of dividends;

13. Carry Forward of Losses.

CARRY FORWARD LOSSES YEARSCopper and Cobalt mining 10 or (20 years for KCM

and MCM)Other mining 5 yearsNon-mining 5 yearsFarming and non-traditional exports 5 years

Incentives in relation to VAT are:

1. Relief for VAT registered enterprises on imports of eligible capital goods. (VAT deferment);

2. Zero rate on export of taxable products;3. Relief of vat on transfer of business as a going concern;4. Equal treatment of services for vat-reverse vat;5. Cash accounting for specialized associations e.g. association of building and

civil engineering contractors;6. VAT relief on input tax paid for purchases made by registered suppliers.7. Input tax claim for three months prior to vat registration for businesses that

have already commenced trading;8. Reduction of VAT rate for investors in tax free zones.

VAT Sector-Specific Incentives:

1. Input tax claim for three months prior to vat registration for businesses that have already commenced trading;

2. Reduction of VAT rate for investors in tax free zones.

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Value Added TaxAgriculture

1. Refund of Zambian VAT on purchase and export of Zambian products by non-resident businesses under the commercial exporters scheme;

2. Input tax claim for three months prior to registration for businesses that have already commenced trading.

3. Input tax claim for two years prior to commencement of production.

1. Input tax claim for five years on pre-production expenditure for exploration companies in the mining sector;

2. Zero rate on mining products for export.

1. Zero rate-other tourist services;2. Refund to non-resident tourists and visitors;3. No import vat on all goods temporarily imported into the country by foreign

tourists.

2 . 5 I n t e r n a t i o n a l T r a d e & E x p o r t P r o m o t i o n

Generally, all business entities engaging in both domestic and international trade are required by law to be registered with the Patents and Companies Registration Agency (PACRA) which is an Executive Agency of the Ministry of Commerce, Trade and Industry. For the detailed process please see section 3.2.

Information in this section is mainly extracted from the ZDA Investor Guide Handbook (2013) which provides a detailed overview of relevant processes, requirements, laws and conditions applicable to investors in Zambia.

For clearing goods through Customs, the importer must present the usual commercial documents such as bill of lading, airway bill and commercial invoice. The Import Declaration Form is used for statistical purposes, and no fee is required. For goods to be cleared at the border, the standard form for entry and exit is used which is the Zambia Revenue Authority (ZRA) form CE 20. Zambia is using the Automated System for Customs Data and Management (ASYCUDA). Like that, customs clearance can be accomplished within hours. However incomplete forms and other difficulties, e.g., lack of supporting documents, can result in substantial delays.

Tariffs are applied on the c.i.f. (cost, insurance and freight) basis. Customs tariffs are calculated on the basis of the dutiable value, based on the WTO Agreement on Customs Valuation. Most tariffs are ad valorem, but a few specific tariffs remain. Zambia uses the international harmonized system. The Zambian tariff schedule is structured around four tiers: 0%, 5%, 15% and 25% rates of duty. Virtually all raw materials and most industrial or productive machinery fall within the 0 and 5 percent tariff categories, while most imported intermediate goods are subject to 15 percent. Imported final products are rated at 25 percent. Zambia has a simple average import tariff which is about 14 percent.

There are three categories for import duties: 25% mainly for finished products 15% intermediate goods 0 – 5% raw materials and capital goods

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ManufacturingMiningTourismImport ProceduresCustoms Clearance and ValuationTariff Structure Import Duties

Other levies are excise duties on certain products at rates ranging from 3 percent to 145 percent. The excise duty is collected on mineral water, cane and beet sugar and some derivatives, beverages, tobacco and some derivatives and substitutes, electricity and petroleum products.

Value Added Tax (VAT) applies to both goods and services, of domestics production and those that are imported. The standard rate is 16%. VAT is also levied on the c.i.f. value plus customs tariff. Some exceptions exist and cover social services such as education, health and funeral services.

There are import prohibitions for environmental, health and security reasons. Import licensing is required for most agricultural products which represent often a delaying factor for operations. Currently, Zambia does not apply trade sanctions.

Sanitary and phytosanitary regulations apply to imports of live animals, plants and seeds. From the exporting country, a sanitary certificate is required as a prerequisite to the issuance of the veterinary permit. Food imports must satisfy the provisions of the Food and Drugs Act of September 1978 which requires packaging and labelling requirement for food, and standards for maize samp, rice and bread.

For exporting products, exporters must complete an export declaration form (standard customs authority form ZRA CE 20), which serves mainly statistical purposes. An original commercial invoice and a packaging list for shipment should accompany the form CE20. An airway bill or bill of lading for transportation of exports should also be obtained either from the freight forwarder or the transporter being used. There are no export taxes, charges or levies. If there are preferences that are being claimed in the exporting market (e.g., reduced tariffs), then an appropriate stamped certificate of origin, from the ZRA is required. COMESA, SADC, EU and AGOA textiles have different certificates of origin.

Some commodities are covered by the Veterinary Department, and for them a sanitary/phytosanitary certificate is required. The phytosanitary certificate is obtained from the Mount Makulu Research Station for seeds, stems, and fruits. There is also a very limited number of goods requiring a special export permit. Gemstone exports require a permit from the Ministry of Mines; and timber requires a timber verification certificate from the Forestry Department. Additional information on exports may be obtained from the ZDA Export Division.

Based on the double membership of Zambia in COMESA and SADC, it has both preferential and non-preferential rules of origin. In terms of preferential rules, COMESA provides for four alternative criteria for determining origin. The SADC rules of origin, however, are negotiated, in many cases, on a product-by-product basis which is making them complex and varied across products.

2 . 6 O t h e r I s s u e s

The ZDA Act (2006) provides special incentives for investors who are designated as micro or small enterprises under the Act. As one function of ZDA is inherited by its mergence with the Small Enterprise Development Board (SEDB), the Act explicitly states the function to promote and facilitate the development of micro

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Other Levies and Charges Import Restrictions Sanitary and Phytosanitary Regulations

Export ProceduresSanitary and Phytosanitary Certificate

Regional Preferential TariffsPromotion of Micro and Small Enterprises

and small business enterprises in articles 22-25. The Trade Licensing Act is furthermore not applicable to micro or small business enterprises registered under the ZDA Act (2006).In addition to the general incentives provided by the Act, such investors are entitled to: Income exempt from tax for the first 3 years for an enterprise in an urban area; Income exempt from tax for the first 5 years for an enterprise in a rural area.

In order to promote the economic development and especially the private sector, government has set up the Private Sector Development (PSD) Programme. It covers over 80 measures covering policy environment, institutions, trade expansion, infrastructure, citizen’s empowerment, business facilitation and economic diversification. Action Plans were developed and one plan was, for example, the creation of ZDA as well as plans for Ministries to tackle administrative barriers. Due to its success, the second phase of the programme was developed and recently approved to start soon.

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Private Sector Development Programme

3 A C C E S S A N D A D M I S S I O N O F F O R E I G N I N V E S T O R S

3 . 1 F o r e i g n I n v e s t m e n t & C a p i t a l M o b i l i t y

The current National Development Plan (SNDP) guides the Zambian Development Agency (ZDA) Act of 2006 by providing the sectors where government seeks development. These sectors are made more attractive for investments by providing special incentives (please see below for more details on the individual incentives).

Foreign investors may invest in any activity that is open to the private sector, with the exception of sectors closed to the private sector such as arms production, security printing and the manufacturing of dangerous substances.

The ZDA Act (2006) defines / clarifies the different terms relevant to investment operations in Article 3.

Foreign Investment: means investment brought in by an investor from outside Zambia.

Foreign Investor: means a person who makes direct investment in the country and who in case of a natural person is not a citizen or permanent resident of Zambia and in the case of a company is incorporates outside Zambia.

Investment: means contribution of capital, in cash or in kind, by an investor to a new business enterprise, to the expansion or rehabilitation of an existing business enterprise or to the purchase of an existing business enterprise from the State.

Investor: means any person, natural or juristic, whether a citizen of Zambia or not, investing in Zambia in accordance with this Act, and includes a micro or small business enterprise and rural business enterprise.

Local investor: means a person who makes direct investment in the county and who in the case of a natural person is a citizen or permanent resident and in the case of a company is incorporated in Zambia.

Zambia has conducted four investor surveys in 2002, 2007, 2009, 2010, 2011 and 2012 assessing the opinion of investors on the different processes, conditions of investment, current investment climate, as well as actual investments realised, employments created etc. The surveys were conducted by the ZDA, Department for Monitoring & Research together with the Bank of Zambia and the Central Statistical oOffices. Besides collecting and displaying valuable information on the extent and success of investments, they also present a monitoring tool for ZDA to evaluate the extent of realisation of approved investment pledges.

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Investment Legislation and its Reasoning

Open Sectors and RestrictionsInvestor DefinitionsInvestor Surveys

3 . 2 F o r e i g n I n v e s t m e n t E s t a b l i s h m e n t , R e g i s t e r i n g a n d L i c e n s i n g P r o c e s s e s

Any investor wishing to receive incentives and guarantees provided by the ZDA Act is required to apply at ZDA for approval of the investment project under the ZDA Act (2006). ZDA will then conduct a screening process of the project and decide on the extent of special conditions and incentives that apply. The project is approved by granting of the investment certificate.

Before applying for the investment certificate, all businesses engaging in both domestic and international trade are obliged by law to register with the Patents and Companies Registration Agency (PACRA) which is an Executive Agency of the Ministry of Commerce, Trade and Industry. ZDA provides the company registration service also in-house as it operates as a one-stop shop.

The registration of the business is either by: a business name; a public or private company (therefore being incorporated in Zambia), or a foreign company.

Conditions for registration are that the applicant suggests 3 possible company names; the company has a minimum of 2 shareholders, and that at least 50% of the shareholders live permanently in Zambia. The last condition aims to encourage Joint Ventures of foreign and national partners and entities.

The minimum capital required for registering a public or private company is K5 million (about US$ 950). Registration fees also vary according to the form of business and process. They include name search, forms, processing of application forms, etc.:

K2510 name clearance; K80,000 for registering a business name; K255,000 for registering a limited company; K1, 350,000 for a foreign company.

Foreign companies are allowed to register with the Registrar of Companies within 28 days of setting up or acquiring an established place of business according to the Company's Act. The documentation requirement may be obtained from the Office of the Registrar of Companies and all forms can be found online. In general, all companies must submit annual returns with the Registrar of Companies within three months after the end of the financial year or one month after the Annual General Meeting if it is held within three months after the financial year.

The process of registration takes about 7 2 days. According to the World Bank Doing Business Ranking 20140, Zambia performs well in terms of ease of starting a business for the last 4 years already. The number of procedures is 6 which is almost half of the regional average (10) and requires on average only 18 days in total. However, UNCTAD (2006) found that investors in the tourism sector faced to go through a challenging series of licenses and permits required. Taken into consideration the costs and time required for every step, it added up significantly. ZDA stated that since 2009, the required list of licenses had been reduced to

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Business EstablishmentConditions for Company RegistrationGood Performance in Starting a Business

improve the processing time. Another aspect affecting the running of businesses was mentioned by investors still in 2007 were the uncoordinated, repeated and random inspections and controls by government officials.

After registration as a company, the investor can submit his application for the Certificate of Registration to ZDA. The Zambia Development Act No. 11 of 2006 provides for investment incentives and investment guarantees which the investor can obtain when registering with ZDA. Any future expansion of the investment or diversification can, again, be applied for in order to take advantage of guarantees and incentives according to the Act. The major documents required to support an application for a Certificate of registration include the following documents:

Copy of Certificate of Incorporation, issued by the Registrar of Companies; Certificate of Share capital; Official list of shareholders / directors; Proof of finance (certificate of deposit at bank or latest bank statement; Detailed Business Plan; Proof of having secured a place / land to operate from (Lease Agreements or

Title Deed or Letter of Offer).

Applications for a Certificate of Registration in some sectors of the economy require proof that application for subsidiary permits from relevant institutions or ministries have been lodged. This is, e.g., the case in the manufacturing sector where additional licenses are needed from the city, municipal and district councils.

The screening and approval process takes about 72 24 hours. For granting the licensecertificate, the ZDA Approval Committee has to be convinced that the project brings developmental benefits to the economy and will not harm the environment. The committee is therefore constituted by stakeholders from the different ministries such as Immigration, Ministry of Commerce, Trade and Finance, Ministry of Land, and others. They meet every 4 weeks to discuss and approve the applications The certificate of registration is approved within 24 hours as long as all registration requirements are met. With the investment license, the investor is guaranteed all advantages and rights as provided in the ZDA Act.

In case an Environmental Impact Assessment (EIA) has to be undertaken, an extra period of 90 days shall be taken into account. An assessment takes at least about 30 days and time for identification and hiring of a consultant has also to be considered.

After granting of the licensecertificate of registration, ZDA provides further facilitation and support to investors for acquiring secondary licenses and permits as well as support in finding suitable land. Please see section 3.4 below for more information.

Depending on the respective sector, diverse licenses and permits have to be acquired as described above. In the following, the ZDA Investor Guide Handbook is cited on the different sector requirements.

Zambia Wildlife Authority Permit:

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Investment ApprovalEIATourism Sector

“Investment projects that have to be located in a Game Management Area will require a permit issued by the Zambia Wildlife Authority (ZAWA). Applications for the permit should be supported by the following documents:

Project proposal; List of Shareholders; Information on promoters' business experience; Recommendation letter from the District council;

The District Council may issue a recommendation letter to ZAWA, upon submission of: Letter of intent; Letter of Consent from the chief (Game Management Areas fall under traditional land

which is under the jurisdiction of the local chief); Project proposal; Building Drawings.

Tourist Enterprise LicenseThe Zambia National Tourist Board authorizes the establishment and licenses all tourist enterprise in Zambia under the Tourism Act, Cap 155 of the Laws of Zambia. A Tourist Enterprise includes the construction of an hotel or commercial accommodation establishment, a tour operating business, a travel agency, a camp site, restaurant or café, a discotheque or night club, a campsite, an air charter, a convention centre, and such other enterprise catering for tourists as the Minister may, by Statutory Instrument, declare.

The license may be issued upon submission of the following documents: Five year business plan; Cashflow statement or proof of capital requirement; Building and or architectural plans; Letter from promoters' commercial bank; Financial and personal information about the shareholders; Curriculum vitae in respect of the shareholders; Copy of the company's certificate of incorporation; Memorandum and Articles of Association (for limited companies); Title deed or lease agreement; Most recent audited accounts (for existing businesses); Environmental Impact Assessment or Project Brief (for small companies); No objection letter from ZAWA (for project locating in Game Management

Areas; or National Parks); Investment License issued by the Zambia Development Agency.

Hotel LicenseThe Ministry of Tourism through the Hotels Board may issue a hotel licence to the applicant upon submission of the following documents:

Tourist Enterprise Licence; Health permit and fire safety certificate from the local council; Liquor licence from the local council.

The furniture and equipment must be in place and the premises must pass final inspection from the Hotels Board

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The Ministry of Mines, Energy and Water Development and Mineral Resources is responsible for the issuance of permits and licences relating to investment in the mining sector. The licences and permits issued include large scale mining, small scale mining, prospecting licence, prospecting permit, retention licence, gemstone licence, gemstone sales certificate, artisan’s mining rights and the reconnaissance permit. Applications for the above permits and licences must be supported by the following documents:

Topographical maps of the area; Certificate of incorporation and articles of association; Photocopies of passports of directors and shareholders; Bank statements and reference letters from applicants’ bank; Programme of operations and estimated costs; Statement of mineral deposit in the mining area.

The Bank of Zambia, as the Central Bank and an agency for executing government’s monetary policy, is responsible for issuance of banking licences.

The applicants for a banking licence should meet the following requirements:

Minimum capital of US$ 100m for foreign banks and K250 million for non-bank financial institutions;

Complete questionnaire for principal managers and directors; Disclose any criminal record for all principal managers and directors; Provide details about principal managers’ experience in banking.

The applicants will further be required to submit the following documents:

Biographical data form; Business plan with three year financial projections ( Profit & Loss Account,

Cashflow and Balance Sheet statements); Curriculum Vitae for all principal managers and shareholders; Copy of the company’s Certificate of Incorporation; Copy of the company’s Articles of Association; Approval by the home country supervisors (usually another Central Bank), if

the applicants are foreign registered financial institution.

Air Transport

The Department of Civil Aviation, which falls under the Ministry of Transport and Communications, is responsible for issuance of the Aircraft Licence. The following document will be required to support an application for the licence:

Copy of type of certificate; Certificate of technical data sheet; Copy of current certificate of airworthiness; Copy of the flight manual or equivalent; Complete set of manufacturer’s maintenance, overhaul and repair manual and

an illustrated parts catalogue; Complete set of manufacturer’s service bulletin or equivalent documents

relating to the airplane; Copy of the crew operations manual; Copy of the mass and balance manual;

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Mining SectorFinancial SectorTransport Sector

Flight test reports for the avionics systems and the aircraft; Electrical load analysis covering all services; Complete set of wiring diagrams covering all radio and electrical installations; Copy of the Master Minimum Equipment list.

Road Transport

Road Service LicenceThe Road Traffic Department and Safety Agency may issue the road service licence upon submission of the motor book, the company certificate of incorporation, the motor vehicle examiner’s report and bank statement.

Energy LicenceThe Energy Regulations Board is responsible for issuance of licences in the energy sector. Applications for energy licences should be supported by the following documents:

Five year business plan; Current and latest audited financial statements; Details of any expected subsequent substantial capital outflows including major

decommissioning costs; Estimates of net annual cash flows.

CertificateInvestors in the health sector are required to obtain a certificate from the Medical Council of Zambia (MCZ). Applications for the certificate should be supported by the following documents:

Certificate of incorporation List of Directors Qualifications of paramedical and logistical staff that should be registered and

having practicing licence with MCZ.

The MCZ would inspect the premises, equipment and protective wear prior to issuance of the certificate.

CertificatePotential investors in the education sector are required to obtain a certificate from the Ministry of Education. The supporting documents for the certificate include the certificate of incorporation and qualifications of the teaching staff. The Ministry of education officials would inspect the building premises and the teaching facilities prior to issuance of the certificate.

Radio or Telecommunications LicenceThe Zambia Information Communication and Technology Authority, which falls under the Ministry of Transport and Communications, is responsible for issuance of the above licences. Applications for the licences should be supported by the following documents:

Certificate of Incorporation Business Plan

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Energy SectorHealth SectorEducation SectorTelecommunica-tions Sector

Detailed description of the nature of the service, if not indicated in the business plan

Audited Accounts Return on allotment shares Bank reference letter.

The Project Brief and Environmental Impact StatementMost projects in all sectors other than the service sector require authorization from the Environmental Council of Zambia (ECZ).Zambia Environmental Management Agency (ZEMA) It is a requirement under the Environmental Protection and Pollution Control Act (EPPCA) Cap 204 of the Laws of Zambia that before a project is undertaken, an Environmental Project Brief (EPB) or an Environmental Impact Statement (EIS) is submitted to ECZZEMA to ascertain its impacts on the environment. A Decision Letter will be issued by the ECZZEMA when they are satisfied that the project will have no negative environmental impact.

Title DeedsLands Department is responsible for issuance of Title Deeds upon submission of either an Investment License Certificate issued by the Zambia Development Agency or the following documents:

Certificate of Incorporation Land sketch Letter of consent from the chief Recommendation letter from the local council

Whole Sale, Manufacturer's and Agents' LicenceBusiness Permits Upon submission of the Certificate of Incorporation, the local council would issue the above licences.Business Permits

Forest Concession LicenceThe following documents are required to support an application for the above licence:

Letter of consent from the local chief Letter of consent from the local council Letter of recommendation from the respective Principal Extension Officer Company's Certificate of Incorporation Map of the area of operation Plan of operation Bank statement to prove that the applicants have more than K 10 million,000

The applicants must be able to pay for a minimum of 200 to 600 trees and prove possession of adequate machines and equipment.”

3 . 3 F o r e i g n E m p l o y m e n t & R e s i d e n c e

Visitors from COMESA or SADC states as well as Commonwealth countries usually do not need a visa to visit Zambia. However, there exist some exceptions such as for nationals from Gambia, Ghana, India, Pakistan, Papua New Guinea, Sri

16

Other Sector Permits and Licenses

Business Visas

Lanka and the United Kingdom. Visas for any other nationals can be obtained at the point of entry into Zambia for a fee of US$50 and more, depending on the type of entry visa.

Foreign investors that are allowed an Investors Permit have to apply for such permit at the Immigration Department. It issues Employment permits in accordance to the Immigration and Deportation Act (vol. 9, ch. 123) on the basis of the applicant’s experience and qualifications. A local labour market test is also conducted to check of such qualifications cannot be found locally. ZDA offers to assist the investor in applying for Employment and Investors Permits. The application should be supported by the following documents:

Completed application form Application letter from company on behalf of candidate Certificate of incorporation Certificate of share capital Investment certificate proof of finance (Bank Transfers, Customs form CE

20) Photocopy of Passport Two passport-size photos Police Clearance Certificates from country of origin

Employment permits are issued by the Immigration Headquarters, based on the submission of the following documents:

Completed application form Application letter from company on behalf of candidate Signed contract between candidate and company Professional and academic qualifications(certified copies and translated to

English) Experience reference letters Certificate of incorporation Investment Certificate Photocopy of passport Two passport-size photos Police Clearance Certificates from country of origin

Employers seeking to employ expatriate staff are required to apply for Employment permits from Immigration Headquarters. Such permits are usually issued for an initial period of two years with provision for subsequent extensions or renewals.

Companies that hold an Certificate of Registration from ZDA and invest a minimum of US$ 250,000 are entitled to Employment permits for up to five expatriate employees according to the ZDA Act.

The fees relating to work permits are indicated below (extracted from the ZDA Investor Guide Handbook 2009):

Employment/ Work Permit Investors PermitIssuance K3,000,000 Issuance K2,000,000Renewal K3,500,000 Renewal K2,500,000

17

Investors PermitEmployment permitWork Permits for Expatriate Workers

Replacement K3,000,000 Variation K2,500,000Addition of name to permit K500,000 Replacement K2,500,000

Occupation Change K1,500,000

Payments for the above fees must be made by bank certified cheques and made payable to the Director General of Immigration. Cash payments are not acceptable.

Investors stated in the UNCTAD assessment (2006) that many encountered difficulties in applying for work permits as the process took considerable time and energy.

3 . 4 F o r e i g n I n v e s t o r A c c e s s t o L a n d ( F o r e i g n P r o p e r t y )

The ZDA Investor Guide Handbook (20092013) provided updated information on the different systems and processes for land tenure and acquisition. Hence, the following part is mainly extracted from the Handbook.

A new Land Act No. 29 of 1995 came into force on 23 September 1995. There are two categories of Land in Zambia:

State land: represents only 6% of land in Zambia. This land is zoned into residential, commercial or industrial use by the District Councils according to their jurisdictions.

Customary land, also known as tribal land: cover approximately 94% of all land in Zambia and falls under the jurisdiction of the traditional chiefs.

Titled land is regulated under the Land Act of 1995 and vested in the President. Customary Land and any matters such as settlement on customary land are governed by the customary law and not under the Land Act.

There are two different types of tenure in Zambia: leasehold (also known as titled land) and customary tenure. No land can be owned in freehold. The leasehold tenure runs for a period of 99 years and is renewable for further 99 years. Another renewal is possible if no conditions in the existing agreement have been breached. Customary land can be converted to leasehold and thus allowing it to be used as collateral. According to the 1995 Land Act, the land has then a value and can be sold even without improvement on the land.

Acquisition of land in an area which is designated as State Land requires the consent of the relevant District Council as the District Council is representing the consent of the President. Land that does not fall within the jurisdiction of any council can be alienated upon direct application to the Commissioner of Lands. The Commissioner of Lands will then make a formal offer to the applicant, which will contain similar conditions to those obtaining in the offer made for an application of land situate in the Customary Area.

Land in private ownership can be inherited, bought and sold. Title deeds are issued by the Commissioner of Lands (which represents the ‘State Consent’). In any instance, ‘State Consent’ has to be obtained by the vendor before title deeds can pass to the purchaser.

The Land Act of 1995 provides for establishment of a Lands Tribunal in order to speed up the resolution of land disputes. The head of the Tribunal is a person who

18

UNCTAD ReviewLand AvailabilitySystems of TenureAlienation of State LandPurchase of Private LandLands Tribunals

is qualified to be a judge of the High Court. Any decision taken by the Tribunal can be subject to appeal to the Supreme Court within 30 days of the decision.

According to the Common Leasehold Schemes Act of 1994, it is now possible to purchase a unit in a block or blocks of flats, offices and any other multiple developments. The Act allows for phased development which enables the developer to dispose of units in each phase in order to release money for developing other phases.

A non-Zambian can acquire land under following conditions:

He/She is a permanent resident in Zambia; He/She is an investor according to the Zambia Development Agency Act or any

other law permitting investment in Zambia; A person registers a company under the Companies Act, with no less than 75%

Zambian shareholding. The Title Deed will be issued in the name of the registered company;

Acquisition under a short term tenancy of not more than 5 years; If the person is granted concession or right under the National Parks and

Wildlife Act; In exceptional cases, by Presidential consent in writing even if the above

conditions are not met.

The procedures to follow in such case are:

Before the land can be bought or sold, the ‘State Consent’ has to be obtained through the Commissioner of Lands.

The consent is then issued by the Commissioner of Lands on application and normally does not take more than some days as a matter of routine.

If the applicant is not informed about the approval or rejection within 45 days of filing the application, the application is deemed to be granted. In case that the consent is refused, the reasons for refusal must be furnished to the applicant within 30 days.

UNCTAD (2006) remarks at this system, that the requirement for ‘State consent’ does not appear to serve any public purpose seen that no delays seem to be occurring. As such, it is only an intervention in the land market which imposes unnecessary risks for investors. UNCTAD therefore suggested to consider removal of this provision and have government oversight to land use matters and to due processes in the conversion of land.

To acquire land in a customary area, it is required to present:

The written consent of the area Chief to declassify the customary land. Approval of the local District Council in the area to demarcate customary land. Additional approval from the Director of National Parks and WildlifeGeneral of

Zambia Wildlife Authority, if the land is situated in Game Management Area.

Once these approvals are obtained, they should be submitted to the relevant District Council, which in turn will submit the documents to the Commissioner of Lands. After that, the Commissioner will make a formal offer to the applicant in a letter.

19

Common Leasehold Schemes Act of 1994Acquisition of Land by Non-ZambiansAcquisition of Land in a Customary Area

This letter of offer will stipulate among other conditions:

Consideration Fee: This fee is not a fixed amount but depends upon locality, services provided by the state or council and other related factors.

Survey Requirements: The survey can be carried out by a private or governmental Surveyor. A legal diagram or plan has to be attached to the lease agreement as mandatory requirement prior to issuance of the Certificate of Title.

Preparation Fee: The office of Commissioner of Lands charges fees for the preparation of a lease. These fees are subject to change but they are fixed by statutory instrument.

Registration Fee: This fee is charged by the Lands and Deeds Registry before the lease is registered and the certificate of title issued.

Property Transfer Tax: The Property Transfer Tax Act prescribes that, if land is purchased from a private person then currently 2.56% of the value of land is paid to the ZRA by the vendor. When land is acquired from the State, no tax is to be paid.

Upon acceptance of the offer and payment of these described charges, a lease over 99 year will be prepared transferring the title. If the land is already surveyed, the title deeds can be issued within 60 days. If that is not the case, the process can take up to 3 months or more.

According to investor perceptions described in the UNCTAD report (2006), the last process of consent from the State can take up to 6 months. Furthermore, investors reported the following constraints in 2006:

Slow processes of the council in opening up of land for allocation Cumbersome procedure in the conversion of customary land to titled land/

leasehold land. This aspect is especially important seen that most land in Zambia is customary land.

Poor record-keeping Over centralisation of processing procedures Insufficient co-ordination between the Ministry of Land and the councils

Based on the fact that some land tenure cases required up to 20 years to be processed, government is aiming for improving the procedures and processes. The aim is to shorten the processing time to 7 days which is challenging but possible.

Information on the availability of land can be obtained from:

Offices of the Commissioner of Lands which are in all provinces Council and Commissioner of Lands advertisements in national press Real Estate Agents Zambia Development Agency in liaison with Ministry of Lands Direct contact with Chief and District Council.

ZDA together with the Ministry of Land and the Surveyor General’s department has established the Land Bank programme to identify land for investment purposes. The idea is to identify potential land and reserve it for investor purposes. Investors searching for land to operate can then gain easier access to it. In case the identified

20

Investor PerceptionsInformationLand Bank Programme

land is customary, the government will negotiate with tribal chiefs to covert its status in anticipation of investment. For urban areas where all land is titled, the programme intends to purchase the land and lease it or sell it to the investor.

Currently, government is investigating new sectors such as biofuel production, rubber, coco plantations, palm oil and other sectors. Feasibility studies have been conducted and the programme is in the process of identifying and acquiring suitable land for the development of these sectors through investment.

21

4 F O R E I G N I N V E S T M E N T O P E R A T I O N S

4 . 1 E m p l o y m e n t

The Department of Labour, which falls under the Ministry of Labour and Social Security, is responsible for formulation of labour policy. The department administers the statutes governing employer/employee relations. The ZDA Investor Guide Handbook provides a good overview of all relevant labour laws.

The major pieces of legislation relating to the labour market in Zambia include:

The Employment Act covers all employment conditions and is the fundamental labour law in Zambia. It provides for the basic employment contractual terms such as:

minimum contractual age; establishment of employment contracts; settlement of disputes arising from such contracts of employment; the appointment of Labour Officers and other staff for the administration of the

Act; certain conditions of employment such as ordinary leave, sick leave, maternity,

redundancy and welfare of employees.

Rights and obligations of employers and employees are contained in the Industrial Labour Relations Act from 1993 such as:

the conduct of industrial relations; the establishment of workers/employers organisations, their registration and

administration; collective bargaining; Settlement of dispute through conciliation and arbitration by the Industrial

Relations Court, established under the Act; Consultative Machinery.

The Act encourages works councils as a mean of consultation of employees to the management. It also defines the role of trade unions and the framework for strikes and minimum wages. Zambia has a strong trade union movement and is highly unionized. Therefore most wages are determined through collective bargaining. When an agreement has been achieved, it is forwarded to the Minister for approval. In some types of work, such as management, workers cannot be represented in unions. Under such circumstances, the minimum conditions are set by the Employment Minister though a statutory instrument every two years.

On the other hand, the Zambia Federation of Employers (ZFE), an umbrella organisation for employers, articulates the interest of employers. ZFE is represented at the Tripartite Labour Consultative Council, a body comprising the representatives from Ministry of Labour and Social Security and the unions (through an umbrella body, the Zambia Congress of Trade Unions - ZCTU).

22

Employment ActIndustrial and Labour Relations Act

Labour Unions and related issues

Through the Minimum Wages and Conditions of Employment Act Cap 276, the Minister is enabled to determine minimum conditions of employment for categories of employees not effectively covered through collective bargaining. Such employees include general workers, drivers, clerks and management, as described above.

Protection for young persons and children in an employment relationship is covered by the Employment and Young Persons and Children Act. It is the major law against child labour and abuse.

In state of emergency, this act may be activated and various regulations may be promulgated with regard to labour and employment.

The labour legislation provides for a multitude of allowances and employee protections in addition to the general salary. Normally, there are two categories of employees namely the unionised and non-unionised (management) staff. Conditions of service for non-unionised employees are normally fixed by top management, while those for unionised employees are negotiated through collective bargain / agreement. In industries or companies where conditions of employment are not regulated by a free collective bargaining, the Minimum Wage and Conditions of Work Act provides processes and tools for determining statutory minimum wages and other conditions of employment. In addition, there are several allowances commonly added to the basic salary, which include:

Housing; Transport; Children's medical and education; Water, electricity, holiday travel (usually for senior management staff).

All allowances are taxable at the same rate as the basic salary. Besides, there are also common non-cash benefits such as:

Transport to and from work; Subsidized meals in staff canteen; Sporting and recreation facilities.

Membership of a pension scheme may be a condition of employment and most employers provide a pension scheme for their employees with the National Pensions Scheme Authority (NAPSA). Employers can establish or join other pension schemes under the Pension Scheme Regulation Act. Insurance companies offering pension schemes are, for example:

The Zambia State Insurance Corporation Madison Insurance Professional Insurance Africa Life Insurance

However, individual persons are normally responsible for their life insurance.

All employers are obliged, by the Minimum Wages and Conditions of Employment Act, to grant an employee full pay in case that illness hinders the employee to

23

Minimum Wages and Conditions of Employment Act

Employment of Young Persons and Children Act

Employment (Special Provisions)AllowancesPensions and Life Insurance Medical Coverage and Maternity Benefits

work. In such case, a certificate has to be provided from a registered physician. The maximum period for which such benefit may be given is three months at full pay, followed by three months at half pay. Some employers provide health and medical coverage through membership to private clinics to which the employee and employer contribute equally. It is often also the case that voluntary medical payments for employees’ family members are paid the employer. This, however, is more usual in smaller business entities. The Act also requires provision of paid maternity leave for female employees for up to 90 days provided such female employees have worked for a minimum of twenty four months with their employers.

According to the Employment Act, employers have to provide to employees one of the following: option

Housing or housing allowance in lieu thereof House loan or advance towards the purchase or construction of a house Guarantee facility for a mortgage

The normal working hours in Zambia is 40 hours per week for office workers and 45 hours per week for factory workers. The normal weekly hours should not exceed 48 hours under the Minimum Wages and Conditions of Employment Act. Overtime work is regulated at one and half times of the normal work payment rate and twice the normal rate on weekends and public holidays.

Employers must grant a minimum of 24 days of paid leave annually. It is, however, a normal practice for employers to provide employees with more leave days than prescribed in the Minimum Wages and Condition of Employment Act which will depend on the rank and nature of the employee's job.

Special leave up to 7 days' paid leave has to be granted on the death of an employee's spouse, child, mother or father. The employer is also obliged to provide for a funeral grant for a standard coffin, cash and mealy meal in the event of death of an employee, spouse registered child or dependant of the employee.

A contract of employment may be terminated under the Zambian law through: Resignation of Dismissal; Normal retirement or medical discharge; Expiry of contract; Redundancy; Frustration, such as death.

Under Section 26A of Statutory Instrument No. 15 of 1997, an employer is obliged to allow an employee the opportunity to be heard prior to termination of the contract of employment if the termination is on grounds related to the employee's conduct or performance. This obligation on the part of the employer is in conformity with the International Labour Organisation Convention. Furthermore, the Zambian law prescribes the minimum benefits payable to the affected employee, and requires payment of full wages for an employee declared redundant until the redundant benefits are paid.

24

Housing Working Hours Paid HolidaysSpecial Leave Termination of Employment

The employer is required to pay at least one month's notice and redundancy benefits of not less than two months' basic salary for each completed year of service. The total redundancy adds up to 3 months, therefore. Compared to other countries, UNCTAD (2006) classified the redundancy payment as very high and it was negatively mentioned in investor surveys. Many investors tend to opt for short-term contracts instead.

The Zambian law and practice prohibits discrimination on the basis of race, tribe, political opinion, colour, creed or sex.

4 . 2 B u s i n e s s T a x a t i o n

The legal framework of the Zambian tax system is covered by the Income Tax Act, the Customs and Excise Act and the Value Added Tax Act. The implementing agency in Zambia is the Zambia Revenue Authority (ZRA) and the responsible ministry for tax policy formulation is the Ministry of Finance and National Planning.

With registration at the Registrar of Companies, ZRA receives automatically a notification and a single identification number is issued to the business entity. The tax year runs from 1 April to 31 March of the following year. Taxpayers are generally expected to adopt the 31 March as the accounting date and ZRA's prior approval is required if the taxpayer proposes to adopt a different accounting date. Any change in the accounting date also requires prior approval from ZRA.

The principal taxes for business entities include direct taxes such as corporate income tax, Pay-As-You-Earn, and other personal income, Customs and Excise duties, Value Added Tax (VAT), property transfer tax and mineral royalty according to the Mines and Minerals Act 1995.

The general corporate tax is at 35%. However, there are several preferential rates for sectors that the government wants to promote. Income from the agricultural sector and non-traditional exports (which are all exports except copper and cobalt) is levied at 10%. Companies listed on the Lusaka Stock Exchange are taxed at 33% and banks with income of more than K250 million are levied at the rate of 35%.

The personal income tax is levied in the range of 25-35 %. The maximum rate for farmers is 15 10 %. Employers have to register and operate a Pay-As-you-Earn (PAYE) scheme under which they are required to deduct the appropriate tax from the salary/wage of the liable employees and remit the tax to the ZRA. By legal obligation, the employer is required to deduct such tax and remit it to ZRA. At the end of every year, employers have to submit annual PAYE tax returns on a prescribed ZRA form.

Remuneration paid or payable to an expatriate employee for work performed, carried out or for services rendered in respect of his employment in Zambia are liable to taxation and should also be subject to the deduction of PAYE. This does not take into consideration if the remuneration is paid outside of Zambia or is payable to a person residing outside Zambia.

25

Redundancy Benefits Equal Opportunities ZRA registrationCorporate Tax Personal Income Tax

VAT is levied at 16% since 1 April 2008. There are some specified goods and services are zero-rates or exempt such as basic foods and agricultural products, exports, medical suppliers and drugs, and hotel accommodation in the Livingstone district. Every dealer in or supplier of standard rated and zero-rated goods and services whose taxable turnover exceeds K200 millionK800,000 per annum is required to register for VAT, as defined in the VAT Act No. 4 of 1995 . Voluntary registration is acceptable for dealers whose turnover falls below the stipulated minimum turnover.

In general VAT returns are required on a monthly basis within 21 days of the prescribed accounting period unless they have been allowed the option for extended tax period. Some industries, such as insurance, file their VAT quarterly. In case of late or failure to submit returns, including nil returns, penalties are issued. Input VAT can be claimed within a period of three years from the date of the tax invoice or other documentary evidence. If input VAT occurred in the period prior to the date of VAT registration, it can be claimed within three months.

Taxes on Royalties, Income and Withholding Taxes according to the different sectors are as following (extract from ZDA Investor Guide Handbook 2009):

Copper and Cobalt

Other Mining

Non Mining

Farming and Non-Traditional Exports

Mining Companies with Development Agreement

Royalty Rate 3% of gross value

Gemstone 5% of gross value

n/a n/a

Profit Tax rate

30% 35% 35% (40% for banks with profit above 200m KW

15%

Withholding Tax

15% 15% 15% 15% 15%

UNCTAD (2006) compared Zambia’s taxation level with other African countries. The general system of taxation places Zambia amongst the countries with the heaviest tax burden. Incentives provided for agriculture and manufacturing reduce the tax burden and render it comparably better than comparative countries. However, sector how do not benefits from incentives remain heavily taxed.

4 . 3 E n v i r o n m e n t , P h y s i c a l P l a n n i n g , H e a l t h & S a f e t y , C o n s u m e r P r o t e c t i o n

Article 31 of the ZDA Act (2006) obliges any investor to fulfil the national regulations covering environmental protection, conservation of the nature and employment.

Physical Planning is regulated under the Town and Country Planning Act.

26

Value Added Tax (VAT) Tax burden relatively highPhysical Planning

Relevant environmental legislation is the following: Mines and Minerals Act Environmental Regulations; Act to Amend the Environment Protection and Pollution Control Act; Bio Safety Act; The Environmental Protection and Pollution Control (Environmental Impact

Assessment) Regulations; The Water Supply and Sanitation Act.

Relevant legislation on Labour safety, security and labour conditions is as described above as well as the following act and regulations:

Industrial and Labour relations Act; Employment Act; Employment (Special provisions) Act; Public Health Act; Medical Examination of Young Persons (Underground Work) Act.

The Competition and Fair TradingConsumer Protection Act Nr: 18 24 of 1994 2010 seeks to protect consumers´ welfare and interests by ensuring that they have a greater choice on terms of service, price and quality. The Zambia Competition and Consumer Protection Commission (CCPC)Competition Commission (ZCC) has furthermore a separate Consumer Complaints Desk. The development of a separate law and body for consumer protection was long-time in discussion. A new law is intended to provide better protection against unfair business practices as well as guidelines for the consumer how to react and defend himself against such practises. Currently, the new “Competition and Consumer Protection Act” is in development by the National Assembly.

4 . 4 C o m p e t i t i o n P o l i c y & L a w

The Competition and Fair TradingConsumer Protection Act 2010The Competition and Fair Trading Act Nr: 18 of 1994 was enacted in 19942010, came into force in February 1995,August 2010. and became fully operational in April 1997. The Act established the Competition and Consumer Protection Commission Zambia Competition Commission (ZCC) to guard against anticompetitive business/ trade practices and protect the interest of consumers.

Competition provisions mainly cover four areas namely, restrictive business practices, mergers and acquisitions, cartels, and lastly abuse of dominant position of market power. These provisions were there in the Competition and Fair Trading Act under sections 7, 8, 9, 10 and 11 and there are also in the new Act under Part III (restrictive business practices), Part IV (mergers), and Part V (Market Inquiries).The law has the following objectives: (i) prevent anti-competitive conduct by encouraging competition and efficiency which will provide a greater choice for consumers; (ii) strengthen the efficiency of production and distribution of goods and services; and (iii) ensure that interests and welfare of consumers by protecting them adequately in their dealing with producers and sellers. The Act will soon be repealed and replaced with the “Competition and Consumer Protection Act” which is already in discussion in the National Assembly.

27

Environmental LegislationLabour LegislationConsumer Protection

4 . 5 M o n e t a r y P o l i c y , F o r e i g n E x c h a n g e a n d F o r e i g n I n v e s t o r s

The Government is committed to a flexible exchange rate regime, called “independently floating” under IMF characteristics. The Zambian Kwacha is free-floating against the major currencies.

In 1994, Zambia removed all restrictions on conversions of Kwacha into foreign currencies, as well as restrictions on transferring money into or out of the country by repealing the Foreign Exchange Control Act. There are no restrictions on the import of foreign currency or foreign currency dealings. In case of the former, cash and traveller cheques have to be declared on the Customs Form at the port of entry; a proof of travellers cheque purchase is needed in case of the later.

The banking system in Zambia allows for bank accounts both in Kwacha and US Dollar. US$ is the second most common currency in Zambia and salaries are often paid in US$ such as expatriate salaries or salaries of international workers.

The ZDA Act (2006) guarantees in Article 20 that a foreign investor is allowed to transfer the following funds out of Zambia in foreign currency: (i) dividends or after-tax income; (ii) principal and interest for any foreign loan; (iii) management fees, royalties and other charges in respect of any agreement; or (iv) the net proceeds of sale or liquidation of a business enterprise. Such transfers can be made after payment of the relevant taxes, notwithstanding any other written law relating to externalisation of funds.

4 . 6 P u b l i c P r o c u r e m e n t

Public Procurement is guided by the Public Procurement Act No. 12 of 2008 and associated tender regulations and is applicable to government ministries and departments, parastatal and statutory bodies, and local councils. There is no threshold for international tenders as the authorities believed. Zambia is not a member of the WTO Agreement on Government Procurement.

4 . 7 I n t e l l e c t u a l P r o p e r t y

Intellectual Property is regulated by the following Acts: Copyright and Performance Rights Act, Merchandise Marks Act, Patents Act, Trade Marks Act, Registered Designs Act and the Plant Variety and Seeds Regulations (1997).

4 . 8 I n v e s t m e n t P r o t e c t i o n a n d D i s p u t e S e t t l e m e n t

After pursuing an extreme nationalisation policy with expropriation of foreign investment in the 1970s, Zambia engaged in rewrapping its protection legislation and signed diverse international agreements to re-establish investor confidence. Today, investor property cannot be expropriated by government, except by act of parliament in extreme circumstance. In case of expropriation, compensation at market value needs to be provided.

28

Monetary PolicyForeign Exchange ControlsForeign Currency AccountsRepatriation of Profits

The Constitution of Zambia guarantees in Article 16 the protection from deprivation of property.

(1) “Except as provided in this Article, no property of any description shall be compulsorily taken possession of, and no interest in or right over property of any description shall be compulsorily acquired, unless by or under the authority of an Act of Parliament which provides for payment of adequate compensation for the property or interest or right to be taken possession of or acquired.

(2) Nothing contained in or done under the authority of any law shall be held to be inconsistent with or in contravention of clause (1) to the extent that it is shown that such law provides for the taking possession or acquisition of any property or interest therein or right thereover — (…)

(3) An Act of Parliament such as is referred to in clause (1) shall provide that in default of agreement, the amount of compensation shall be determined by a court of competent jurisdiction.”

Also the ZDA Act (2006), Article 19, covers investor protection:(1) “An investor’s property shall not be compulsorily acquired nor shall any

interest in or right over such property be compulsorily acquired except for public purposes under an Act of Parliament relating to the compulsory acquisition of property which provides for payment of compensation for such acquisition.

(2) Any compensation payable under this section shall be made promptly at the market value and shall be fully transferable at the applicable exchange rate in the currency in which the investment was originally made, without deductions for taxes, levies and other duties, except where those are due.”

The UNCTAD Investment Policy Review (2006) remarks that, according to international practices, there are 4 conditions for expropriation: public interest, due process, non-discrimination, and prompt, adequate and effective compensation. According to existing legislation in Zambia, three conditions are covered but non-discrimination is not provided for. Only in one BIT with Germany, all four conditions are covered. Zambia’s investor protection is good, but UNCTAD advises to include the non-discrimination condition in Article 19 ZDA Act.

In addition, a protection against non-commercial risks is given as Zambia is signatory of the Multilateral Investment Guarantee Agency (MIGA) and the Africa Trade Insurance Agency. Special Bilateral Investment Protection Agreements, the BITs, exist with numerous countries (please see list below) which provide additional guarantees for foreigners. Zambia’s BITs do take account of special arrangements under regional agreements that give advantages to nationals of third states.

Article 21 of the ZDA Act (2006) refers to the Arbitration Act No. 19 of 2000 for the settlement of any dispute arising as a consequence of an investment. This Act applies to any arbitration agreement to which the State is a party with the exception of arbitration between the Government of Zambia and a government of a foreign country, and the Government and any undertaking that is wholly owned or controlled by the government by a foreign country (unless it is agreed otherwise).

29

Constitution of ZambiaZDA Act (2006)UNCTAD:Coverage of Conditions for Expropriation

MIGA and BITs

Dispute Settlement

It states that claimants must first file internal dispute settlement with the Zambian High Court. If that fails, the parties may chose international arbitration which is recognized as binding by the State of Zambia. Zambia adheres to the New York Convention on the Settlement of Investment Disputes between States and Nationals of other States and is member of the International Centre for the Settlement of Investment Disputes (ICSID). The procedures for that and those as defined in the convention are covered in the Investment Disputes Convention Act. Zambia is also member of the United Nations Commission of International Trade Law (UNCITRAL).

The Zambian court system has been identified to be overloaded and therefore inefficient in the resolution of disputes occurring. In order to decongest the courts and improve the administration of justice in Zambia, the Zambia Centre for Dispute Resolution (ZCDR) Ltd. was established. It is a non-for-profit organisation of 16 business and professional organisations operating in Zambia. ZCDR promotes and popularises arbitration and other alternative dispute resolution (ADR) methods with the intention to create a conducive environment to foreign investment. Their main area of activity is: (i) training arbitrators; (ii) conducting seminars and workshops with professionals and business organisations to promote the use of alternative dispute resolutions; (ii) providing advice to lawyers and business persons on drafting of appropriate arbitration agreements and processes involved, and (iv) providing adviseadvice to arbitrators.

4 . 9 I n t e r n a t i o n a l A g r e e m e n t s a n d O b l i g a t i o n s – T r a d e a n d o t h e r A g r e e m e n t s , B I T s , D T T s

Zambia has signed the AGOA Treatment with the United States and is granted preferential market access for textile products.

30

ICSID, UNICTRALArbitration AlternativesAGOA

Zambia qualifies for trading under the Everything But Arms (EBA) Agreement and is member of the WTO. Furthermore, Zambia is member of MIGA and ICSID for the resolution of international investor disputes.

Zambia is member of 2 Regional economic initiatives, namely SADC and COMESA. Zambia hosts the COMESA Secretariat and is highly involved in progressing regional integration under COMESA.

The Common Market for East and Southern Africa (COMESA) has been operating, in one form or another, since 1981. Economic integration is envisaged to progress from the Free Trade Area (FTA) to an economic monetary union. The FTA became operational on 1November 2000 with nine participating countries. The COMESA FTA is an agreement among members not to apply customs duties or charges on goods traded amongst them. The eligible goods for duty-free treatment must meet the agreed upon Rules of Origin. Members also agree to eliminate all non-tariff barriers to trade between them. The nine member countries that are implementing zero tariffs are Egypt, Sudan, Kenya, Djibouti, Malawi, Madagascar, Mauritius, Zambia and Zimbabwe. A COMESA Certificate of Origin is required for each consignment of goods and is obtained from the Revenue Authority in respective member countries.

Please see below a list of BITs and DTTs

5 S A D C R E L A T E D I S S U E S

As member of the SADC group, Zambia has signed the Trade Protocol that is calling for the implementation of a Free Trade Area. Each member has to negotiate two reduced tariff schedules. Zambia’s implementation came into effect on 30 April 2001. Due to a delayed tariff reduction to South Africa, the market experiences a delayed liberalisation. Products of highest sensitivity for Zambia and with a tariff reduction to zero over 12 years are meat and dairy products, tea, some flours, raw sugar, cement, textiles and clothing, and motor vehicles. For all goods, a SADC Certificate of Origin is required which can be obtained from the Zambia Revenue Authority.

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WTO, EBA, etc.Regional IntegrationCOMESASADC Free Trade Area

Bilateral Investment Treaties 1 June 2009Partner Country Date of signature Date of Entry

into force1 Belgium and

Luxembourg18-May-01 -

2 China 21-Jun-96 -3 Cuba 22-Jan-00 -4 Egypt 28-Apr-00 -5 Finland 07-Sep-05 -6 France 01-Jan-02 -7 Germany 10-Dec-66 25-Aug-728 Ghana 18-May-01 -9 Italy 20-Apr-03 -10 Netherlands 30-Apr-03 -11 Switzerland 03-Aug-94 07-Mar-95

Double Taxation Agreements 1 June 2009Partner Country Type of Agreement Date of Signature

1 Canada Income and Capital 16-Feb-842 Denmark Income and Capital 13-Sep-733 Finland Income and Capital 03-Nov-784 France Income and Capital 05-Nov-635 Germany Income and Capital 13-May-736 India Income and Capital 05-Jun-817 Ireland Income and Capital 29-Mar-718 Italy Income and Capital 27-Oct-729 Japan Income and Capital 19-Feb-7010 Kenya Income and Capital 27-Aug-6811 Netherlands Income and Capital 19-Dec-7712 Norway Income and Capital 14-Jul-7113 Poland Income and Capital 19-May-9514 South Africa Income and Capital 22-May-5615 Sweden Income and Capital 18-Mar-7416 Switzerland Income and Capital 30-May-6117 Uganda Income and Capital 24-Aug-6818 United Kingdom Income and Capital 22-Mar-7219 Tanzania, United

RepublicIncome and Capital 02-Mar-68

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Bilateral Investment Treaties Double Taxation Agreements

Sources included

Bank of Zambia (2010) Website, www.boz.org.zmCUTS (2003) Investment Policy in Zambia, Performance and Perceptions, Discussion paper

Government of Zambia: diverse legislation and regulations

Government of Zambia (2006) Fifth National Development Plan 2006-2010

Mwenda, Winnie Sithole (2006) Paradigms of Alternative Dispute Resolution and Justice Delivery in Zambia, Doctor thesis, submitted to the University of South Africa, November 2006

Peacebuilding Portal (2010) Zambia Centre for Dispute Resolution, http://www.peacebuildingportal.org/index.asp?pgid=9&org=4262

Zambia Development Agency (ZDA) (20113) ZDA Investor Guide Handbook, June 2011February 2013

Zambia Development Agency (2010) ZDA Website including relevant information, www.zda.org.zm

UNCTAD (2006) Investment Policy Review Zambia

UNCTAD (2006) Blue Book on Best Practices in Investment Promotion and Facilitation: Zambia

UNCTAD (2010) Bilateral Investment Treaties and Double Taxation Treaties, http://www.unctad.org/Templates/Page.asp?intItemID=4505&lang=1World Bank (2010) Doing Business Report 2010, www. doingbusiness .org/

WTO (2009) Trade Policy Review, Review by the Secretariat, Zambia, RevisionInterviews with ZDA; investors, government officials

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