Witholding Tax- ZRA, Landlord, Tenants, And The Government

By Leonard Mangani Zulu

Withholding Tax was first introduced in Zambia on Interest, Management and Consultancy Fees, Royalties and Public Entertainment Fees in 1971. The Withholding Tax has over the years been extended to Dividends, Rent, Commissions and Payments to Non – Resident Contractors.
What is Withholding Tax?
Withholding Tax is not a tax but a means of collecting that tax. Withholding Tax is deductible from a payment by the person who is liable to make payment (the payer) at the point in time the person to whom it is due to be made (the payee) becomes legally entitled to it (date of accrual). The payer is required to pay the tax deductible to the Zambia Revenue Authority by reference to the date of accrual no matter how, when or where payment is made.
Rent means “a payment in any form including a fine, premium or any like amount, made as a consideration for the use or occupation of or the right to use or occupy any real property including personal property directly connected with the use or occupation or the right to use or occupy such real property”. The rate of Withholding Tax is 10%. Tenants are supposed to withhold 10% from the landlord and pay this to ZRA. If the rent is 1500, you have to pay 1350 to the landlord, keep 150 and pay this to ZRA.
The payer (tenant) is responsible for deducting Withholding Tax from gross rentals on the date of accrual of any amount due to the payee (landlord). The tenant should remit the amount so deducted to the Zambia Revenue Authority. However, this is not the final tax. At the end of year, the taxpayer will be required to submit an Income Tax Return containing all sources of income, including rental income. The final tax will be determined through an assessment. The Withholding Tax deducted is taken into account before arriving at the final tax. In other words, WHT is the money that a tenant holds on behalf of the government from the rentals s/he is supposed to pay to the landlord. The tenant in return sends the money to ZRA, obtains a receipt and gives that receipt to the landlord as proof that the money has been remitted. Alternatively, the landlord can get the whole rental payment, and then walk to ZRA, where he/she pays for himself at a reduced rate. If the landlord wants to put the onus of paying tax on the tenant, THEN THE LANDLORD SHOULD PUT IN THE TENANCY AGREEMENT A CLAUSE SAYING THE TENANT SHALL PAY A NET OF ……………….. AS RENTALS. This means that as tenant you have to add up the % for tax to know your actual rental payments. Otherwise a tenant is supposed to withhold the tax on behalf of the government.
It all depends on whether you signed a net agreement or gross agreement. If net, then what the landlord receives or charges is net of taxes e.g. net agreement at 1,500 per month will attract a 166.67 WHT (payable to ZRA) to be added to 1,500 to make the gross (including taxes) rent of 1,666.67. If it is however a gross agreement then the landlord should only be paid 1,350 and the 150 remitted to ZRA by the tenant. So make sure you sign gross agreements that way the amount indicated will be your absolute cost.
In general, tax withholding is good for the government and bad for taxpayers. This Tax helps to broaden the tax net by bringing otherwise unknown tax payers or tax evaders into the tax net. This Tax prevents tax evasion(s) which are usually disguised in obscure transactions. This Tax makes tax payment less cumbersome for the tax payer who may not have the culture of filing tax returns and making tax payments. This Tax guarantees regular flow of revenue to the government, and this Tax is a form of voluntary compliance with tax Laws.
It is no doubt that this tax has been necessitated by reckless government expenditure. Yes this law has been in existence for a longtime, but the same reasons it failed then, are the very reasons it will fail now. The Authority clearly has no means to collect, they have no database of tenants and landlords, and there I foresee a problem. Have you any idea how unplanned and uncoordinated or towns are? The other problem is willingness of landlords to accept the system; this means that landlords would rather pass on the costs to their tenants thereby increasing the cost of living to the majority of Zambians who are mostly tenants. And is the tenant even willing to sacrifice his/her time to stand in line to remit? Oh! The online system you argue? But is the average Zambian deep in the rural area or just here in Lusaka in the compounds able to utilize that?
The irresponsible fiscal policies of this administration have caused the national debt to grow at an astonishing rate. The government embarked on a lot of projects without proper planning especially on the source of funding for the projects and the problem has been compounded by theft, corruption, and the many by-elections. And now, Zambians will be forced to repay debts being contracted by the government even when they have not seen the fruits of the same debts through such taxes as the Withholding Tax.
Which begs the question; why not consider increasing the tax base by providing some of us the unemployed youth’s jobs so that we can contribute through PAYE? Sounds like a win-win to me.

Posted by Editor on May 13, 2015. Filed under LATEST NEWS. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry