Nitram Management Consultants are Tax Agents for a variety of non-resident suppliers of services to Zambian VAT registered businesses.
A reverse charge is levied on all services provided by a non-resident supplier. A Reverse charge is simply the transfer of liability to account for and pay Value Added Tax on imported services from the person making the supply (‘the non-resident supplier’) to the local business receiving the supply (‘the recipient’).
Accounting for Reverse Charges by the Recipient
The recipient of the imported service raises a Tax Invoice based on the value of the service received from the non-resident supplier and adds VAT at 16%. The VAT is then declared as output tax on the relevant VAT return. Given that that there is no payment to the recipient of services by the foreign supplier, the reverse charge becomes a cost to the recipient of the foreign service.
How the Recipient Avoids Incurring Reverse Charges
To avoid incurring the Reverse charge, the recipient of imported services must instruct their supplier of imported services to appoint a tax agent who will act on their (non-resident supplier) behalf in invoicing the recipient of services.
Appointment of Tax Agent
A tax agent appointed by a non-resident supplier should be independent of the non–resident supplier. The non-resident supplier will notify Zambia Revenue Authority of the appointment of the tax agent. Where Zambia Revenue Authority accepts the appointment of a tax agent, any tax obligations of the non-resident supplier (other than any obligations subsisting before the agent’s appointment) shall subsist against the tax agent until such a time as Zambia Revenue Authority accepts another tax agent.
Obligations of the Tax Agent
The agent will be required to perform the following functions relating to tax on behalf of the non-resident supplier:
- To notify Zambia Revenue Authority, who will not unnecessarily deny acceptance of intention to take on a new Principal or intention to terminate contract with an existing one;
- To keep and produce any records or accounts relating to each principal;
- To furnish tax returns;
- To pay any tax or interest under the VAT Act;
- To comply with any requirement by Zambia Revenue Authority in Respect of the business.
The tax agent will charge the non – resident supplier agency fees that will attract VAT at 16% for the services. The VAT so charged will not be eligible as input tax on the return raised on behalf of the non – resident supplier.
A service will be considered imported if it is:
- Performed or undertaken in Zambia;
- Utilized (or if the benefit of its supply is for a recipient) in Zambia regardless of where it is performed.
Examples of such services include:
- Management and other consultancy services
- Technical advisory services
- Marketing information and sales promotions
- Inland transportation services
- Building construction and contracting etc
- Installation services (i.e. computers and software)