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Reduction of corporate income tax rate for tourism enterprises

8 October 2020
– 2 Minute Read


Government has proposed to reduce the corporate income tax (CIT) rate on income earned by hotels and lodges on accommodation and food coaches, to 15% from 35%.

Zambia operates a source-based system of taxation, the country’s standard rate of CIT applicable on taxable income of corporate entities, other than individuals and others exempt, is 35%.

The COVID-19 pandemic has dealt a crippling blow to the Zambian travel and tourism industry and the entire value chain linked to the sector is likely to lose around USD 400 million, according to a statement issued in April this year by the ministry responsible for tourism and arts.

For instance, the Eco-Tourism Association of Zambia indicates that the safari tourism sector alone is projecting to lose about USD100 million, with over 7 000 jobs on the brink of being lost.

Further, the Minister of Finance proposed to suspend registration fees for hotel managers, licence renewal fees paid by hotels and lodges, and retention fees paid by tourism enterprises. 

Other proposed relief measures to the sector include the suspension of the15% customs duty on tourist buses and coaches (double-decker) and safari game viewing vehicles of HS Code headings 8702 and 8704 respectively for a period of one-year, effective 1 January 2021. 

These measures will provide relief and assist with placing the sector on a course to recovery as per its performance in the pre–COVID-19 era when it showed signs of healthy growth. 

On the revenue side, these measures might temporarily exert pressure on Government’s 1.8% growth objective and might also be seen as a departure from Government’s policy of avoiding sector-specific tax rates.

In 2019, the tourism industry contributed 7% of gross domestic product and 7.2% of total employment (469 000 jobs). International visitors spent USD 849 million, representing 10% of Zambia’s total exports.