Zambia Revenue Authority

NGO Charitable Associations

Tax Treatment Of Charitable Institutions And Churches

The income accruing to all ecclesiastical, charitable and educational institutions receive privileged tax treatment. Under the provision of the Income Tax Act Cap 323, ecclesiastical, charitable and educational institutions of a public character are exempt from tax:

2nd Sch., Part III, Para. 6

(1) There shall be exempt from tax the income of any charitable institution or of any body of persons or trust established for the promotion of religion or education, or for the relief of poverty or other distress, if, in relation to the people of the Republic, the income may not be expended for any other purpose.

(2)If the income referred to in sub-paragraph (1) is the profit of a business carried on by a charitable institution, body or persons or trust receiving it, that income is not exempt from tax and shall be taxed at the rate specified in the charging schedule;

2nd Sch., Part III, Para. 6A

Notwithstanding the provisions of subparagraph (1) of paragraph 5 and subparagraph (1) of subparagraph of paragraph (6), or any other provisions of this Act, any interest on Treasury Bills or Government Bonds received by any charitable institution, body, person or trust referred to in those paragraphs, shall be subject to withholding tax under section eighty-two A. (As Amended by Act No. 3 of 2003).

Institutions for the relief of poverty, advancement of education, advancement of religion and the protection and care of the sick all fall within the exemption.

The Minister of Finance and National planning must approve an ecclesiastical, charitable or educational institution in order for it to qualify for this exemption and for donations to it to be tax allowable in the hands of the donor. Donations made in monetary terms or in kind by any person to a charitable, ecclesiastical and educational institution are eligible for tax relief. This means that donations made to charitable institutions are tax deductible from the income of the donors (i.e persons who make donations). For, example, tithes or contributions made to churches for no consideration whatsoever are tax deductible.

The foregoing is provided for under Section 41 of the Income Tax Act Cap 323:

S41.(1) Subject to the provisions of this section, any amount paid by a person during a charge year to an ecclesiastical, charitable, research or educational institution of a public character or to a national amateur sporting association or to any fund of a public character wholly and exclusively established for the use of the Republic or for ecclesiastical, charitable, research, educational or amateur sporting purposes, shall be deducted from the income of that person for that charge year if
(a) the payments are in money or money’s worth;
(b) the payments are made for no consideration whatsoever;
(c) the Minister approves the institution, association, or fund to which payment is made or to be made and the Minister may in like manner withdraw such approval and such withdrawal may be made retrospectively.

The procedure in applying for approval under section 41 is fairly simple and straightforward. The application is made to the Commissioner – General, Zambia Revenue Authority. The following documents are to be submitted with the application.
(a) 3 copies of the constitution;
(b) 3 copies of the certificate of Registration;
(c) 3 copies of the latest audited financial statement. (For new organisations, copies of the latest bank statement will do).
On receipt of the application, the Commissioner-General, if satisfied that the application meets all the requirements, will recommend to the Minister of Finance to have the application approved.

Charitable, ecclesiastical and educational Institutions which have been approved under section 41 of the Income Tax Act, enjoy the following tax exemptions:
- Exemptions from payment of Income Tax
- Exemption from payment of Property Transfer Tax; and

Exemption from payment of Withholding Tax

But the Employees (including all Directors/Board members who receive salaries/allowances) of these institutions are still liable to income tax under the PAYE system.
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