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You will find regular updates on our page on information related to:
 Audit
 Management
 Accounting and taxation among others

01/04/2022

WHAT IS PRESUMPTIVE TAXATION?

Presumptive taxation involves the use of indirect means to ascertain tax liability, which differs from usual rules based on the tax payers Account. Presumptive Tax can also be defined as estimates of tax payable that are used in dealing with incomes that are hard to tax for example, the informal sector. Presumptive Tax mainly focuses on the transport sector (passengers) luxury and semi luxury coaches are excluded in this because most companies with luxury coaches are incorporated businesses and they submit returns and accounts regularly. Individual and partnership involved in the transport sector of passengers are liable to pay presumptive tax.
The reason for introducing presumptive tax
Presumptive tax was introduced due to activities and incomes that are hard to tax. The government realized there was need to broaden the tax base and the informal sector was one such area were that could be realized. Transporters like bus operators(passengers) would not pay tax before this tax was introduced. Presumptive tax also offers the possibility of reducing tax evasion at low cost and broadening the revenue base. Presumptive tax mainly focuses on bus, mini-bus and taxi operators, these fall under the informal sector. The informal sector world over is difficult to tax. Some of the reasons the Presumptive tax was introduced are highlighted below
• Low levels of tax literacy. A good number of operators have little knowledge about tax and some say that they are not literate enough to understand taxation or prepare business records
• Constant Breakdowns. A very common complaint or practice from operators is that their vehicles are down for a good portion of the year and hence they disagree with the amount assessed
• High cost of hiring professional Accountants to prepare accounts and handle tax matters. Professional accounting firms are always ready to handle all financial and tax matters of a business entity. Most operators feel they cannot afford the high fee charged by these consultants
These reasons are among the many reasons that have compelled the Government through the Zambia revenue authority to seek to tax this group of tax payers differently, hence presumptive tax.
The changes that have been made ​
The income tax (Amendment) Act 16 of 2017 introduced the rates for presumptive tax effective January 2018, but changes were made to the previous rates in the 2022 National budget. The table below shows the previous rates for 2021 and the current rates for 2022.
Vehicle Sitting Capacity
Previous Tax per annum (K)
Current Tax per annum (K)
64-seater and above
10,800
12,960
50–63-seater
9,000
10,800
36–49-seater
7,200
8,640
22–35-seater
5,400
6,480
18–21-seater
3,600
4,320
12–17-seater
1,800
2,160
Below 12-seater
900
1,080

This measure seeks to adjust presumptive taxes on motor vehicles for the carriage of persons which were last revised in 2018.

About the Author:
Benjamin Mung’omba
Graduate of Accounting and Finance bachelor degree
For more information and comments: +260977327219, [email protected]

30/03/2022

WHAT IS FINANCIAL RISK?

For centuries, different risks have affected many businesses globally. However, the existence of risk, as an integral and inevitable part of the human economic activity, had led to risk management becoming an urgent and even fashion activity on enterprise level. Risk management can be defined as the chance of an investment or outcome differing from expected. It is also referred to as the chance of having negative outcome or unexpected.
Business and financial risks are among the major risks. There is a difference though between the two risks in that financial risk is concerned with the cost of finance while business risk looks at all expenses the business must cover to remain operational and functional. However, today I will briefly talk about financial risk. This is the risk that can involve financial loss to firm which generally arises due to the instability and losses in financial markets, which are caused by movement in interest rate, stock prices and currency fluctuations. Financial risk can be tabulated as follows:

a) Translation risk: This is an accounting risk that arises due to fluctuation in currency exchange rate, which effects translation of assets and liabilities of a foreign subsidiary into the currency of home country.

b) Economic risk: This refers to the likelihood that macroeconomic condition will affect a company or investment negatively due to political instability or exchange rate fluctuation in a business opportunity invested internationally.

c) Transaction risk: This is the kind of risk that arises due to the timing difference from when a transaction is done and receiving of payment for the goods or service rendered. Due to time delay, there is a probability that a party to a business transaction will lose because of adverse effect that foreign exchange rate fluctuation can have on a completed transaction prior to settlement.
Having knowledge of organisational financial risks assists organisation to coordinate and control necessary business data and processes. It provides platform for organisation to prepare adequately and plan to mitigate the risks in order to achieve business objectives. Recognition of business risks is as important as recognising financial risks. In the next write up I will talk about the business risk and measures organisation can put in place in order to reduce the risk so that they can achieve both strategic and business objectives.


About the Author:
Kashiya Mwanda Chabala is the Senior Financial Specialist
For comments: [email protected] / +260977753126

03/03/2022

PAY AS YOU EARN TAX REGIME
Introduction
Pay as you Earn (PAYE) is the method of deducting tax from income the employee earns.
This measure is aimed at providing relief to employees and self-employed individuals, especially those in the lower income brackets. In the 2022 charge year, the exempt threshold for PAYE has increased to K 4500 per month from K4000. Details for other income band and applicable tax rate are provided in the table below.

Current PAYE regime
Income Band Tax Rate
0-K4, 500 per month 0%
K4,501-K4,800 per month 25%
K4,801-K6,900 per month 30%
Above K6,900 37.5%

Scope
The tax is to be deducted not only from monthly and weekly payments but also from daily, annual or irregular payments. The PAYE applies to both casual employees and full time workers.

Late submissions
The normal remittance date for PAYE is the 10th of the month following deduction. Payments made after the 10th will be regarded as late and will attract interest and penalties.
According to Income Tax Act Section71 (3), a penalty of 5% of tax unpaid for each month or part thereof is charged for the period that the tax remains unpaid. In addition Section 78A of the Income Tax Act stipulates that interest is payable on the amount due and is charged at the Bank of Zambia discount rate plus 2%.
Fraud, willful default or negligence
If there is a loss of tax due to fraud, willful default or negligence of an employer, the employer may be liable to penalties under Section 100 of the Income Tax Act, amounting to 52.5%, 35% or 17.5% respectively of the omitted income.
Responsibility for PAYE return/payment submission
It is the responsibility of the employer to deduct tax from payments of emoluments and submit the return and payment to Zambia Revenue Authority (ZRA).
Benefits of PAYE
Revenue collected under the PAYE system contributes to the national budget. The distribution of funds allocated in the national budget influences economic activity in the country as the revenue is then used to meet public expenditure such as education, health, road network and infrastructure and defense

About the Author:
Steve Miyambo is a 4th year student at the National Institution of Public Administration (NIPA) ,
Pursuing a Bachelor’s Degree in Accounting and Finance.
For more information and comments: Miyambosteve170@gmail .com

17/02/2022

TAX REFORMS MADE TO THE RENTAL INCOME
On 29th October 2021, Dr. Situmbeko Musokotwane, Minister of Finance and National Planning
presented the 2022 budget to the National Assembly of Zambia. Just like any other year, the
Government made pronouncements that will affect Zambian fiscal policy. One of areas that has
been affected due to the changes to the tax regime is the taxation on rental income. The measure
took effect on 1st January 2022 and this measure is intended to align the treatment of rental income
with that of other income sources. The following changes have occurred regarding the rental
income:
 Rental income below K800, 000 will be taxed using the Turnover Tax (TOT) rate of 4%
instead of collecting tax using Withholding Tax (WHT) system at a rate of 10%
 Rental income above K800, 000 will be taxed at a rate of 12.5%
 Value Added Tax (VAT) will be further charged on commercial property at the rate of 16%
 The TOT returns will be submitted by the landlord instead of the tenants
 Non-submission of turnover tax will attract a Penalty of 250 penalty units that translates to
K75 per month.
Despite the changes that has taken place concerning rental income, payment due date remains the
same, that is it should be made by the 14th day of the subsequent month of turnover.
About the Author:
Robert Mangani is a 4th year student at the
National Institute of Public Administration
Pursuing a Bachelor’s Degree in Business Administration (NIPA).
For more information and comments: [email protected]

03/02/2022

THE IPPF: FRAMEWORK FOR INTERNAL AUDITORS

The profession of Internal Auditing has been in existence for decades. The earliest accounts of auditing date back to Mesopotamia, where marks were used to record ship cargos and verified financial transactions (CIA – essential of internal auditing 2018) . However, the profession has evolved through the years, most executives and senior management have acknowledged that Internal Auditors provide independent assurance on the effectiveness of organisation's risk management, governance and internal control processes.
In order to work effectively, internal auditors need to have knowledge on the framework that regulates internal auditors worldwide. The International Professional Practices Framework (IPPF), more commonly known as the “Red Book” is the conceptual framework broadcasted by the Institute of Internal Auditors (IIA) - global. The framework provides authoritative guidance. The first edition of this framework was effective on January 1, 2002 of which its latest iteration became effective on January 1, 2017.
An overview of IPPF
The IPPF consists of three sections, this includes the following
 The Mission of internal audit – The mission pronounces what internal audit aspires to accomplish in an organisation.
 The Mandatory guidance consists of the Core Principles for the professional practice of internal auditing, the definition of internal auditing, the Code of Ethics and the International Standards for the Professional Practice of Internal Auditing.
 Recommended guidance consists of implementation guidance and supplemental guidance. Implementation guide assist internal auditors in applying the standards while the supplemental guide provide detailed guidance for conducting internal audit activities.
The IPPF is a valuable resource handbook as it provides the internal audit profession with the necessary support for the career to meet the challenges that are encountered with the ever- changing environment. Application of its essential components will improve service delivery

of internal auditors in most sectors as it provides principles, leading – practice standards and provides timely guidance.

About the Author:

Tabitha Kaunda Mangomba is the Senior Internal Auditor
at the National Institute of Public Administration (NIPA). MBA, FCCA, BSC, dipTAX, AZICA, cisco cybersecurity
For comments: [email protected] / +260977610707

01/02/2022

Welcome!
We are delighted and so excited to have you on We chat Audit! You will find regular updates on our page on information related to:
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