The Property Transfer Tax Act Cap 340 provides for the charge of Property Transfer Tax on the transfer of property.
Property is defined as −
Land, including any improvements on it
A share issued by a company incorporated in the Republic or a share issued by a company incorporated outside the Republic where the company directly or indirectly owns at least ten percent of the shares in a company incorporated in the Republic.
Mining rights or interest granted under the Mines and Minerals Development Act and include −
a large scale mining licence;
a large scale gemstone licence;
a prospecting permit;
a small scale mining licence;
a small scale gemstone licence; and
an artisans mining right.
Intellectual Property such as trademarks, patents and brands.
The value of the property liable to charge is −
If it is land, the open market value, or
If shares, the net realizable value or nominal price whichever is greater.
If a mining right, the actual price of that mining right or interest.
The term "transfer"-
(a). in relation to land, excludes -
- letting or sub-letting;
- leasing, under-leasing or sub-leasing, for a period of less than five years;
(b). in relation to a share, excludes - the allocation of the same by the company to the member in whose name it is first registered but includes transfers of property within a group of companies whose holding company is incorporated in Zambia.
Rate of Tax
The rate of tax applicable on the transfer of land or shares is 5% and 10% for a mining right.
Transfer to immediate family.
Where a person transfers his property to a member of his immediate family, the Realised Value of such property is the actual price, if any received by transferor.
The term "Immediate Family" means, with respect to the person transferring the property:
"a spouse, child, duly adopted child or step-child"
Internal Organisation within a group of companies.
Where, within a group of companies, a company transfers property to another company (other than a company which is not resident in Zambia) within the group for the purposes of internal organization of the group, the Commissioner General may treat such transfer as having no Realised Value.The term group of companies means a holding company together with its subsidiary companies but excludes a situation where there is common shareholding. Holding company means −
a company that holds the majority of the voting rights in another company;
is a member of another company and controls the majority of the voting rights on its own or pursuant to an agreement entered into with the other members; or
is a member of another company and controls and has the right to appoint or remove a majority of the board of directors in that other company.
(1) The following organizations are exempt from Property Transfer Tax:
(a). the Government of the Republic of Zambia;
(b). Any foreign government;
(c). Any international organization, foundation or agency as the Minister of Finance may approve for the purpose;
(d). Any charitable organization or trust registered under section 41 of the Income Tax Act Cap 323;
(e). any co-operative society registered under the Co-operative Societies Act is exempt from tax in that particular charge year when it is exempt under the requirements of the Income Tax Act;
(f). a Local Authority;
(g). Registered Trade Unions;
(h). Any Club, Society or Association registered under Section 41 of the Income Tax Act as a charitable organisation or as the Minister may approve for the purpose;
(i). Approved Pension Fund and Medical Aid Society;
(j). Employees` Savings Scheme or Fund;
(k). Any Political Party registered as a statutory society under the Societies Act.
(2). Shares or stocks that are listed on a stock exchange duly registered under the Securities Act, e.g. the Lusaka Stock Exchange, is exempt from property transfer tax. Listed shares are those that are readily transferable or disposable on that Stock Exchange.
(3). Contributions towards the equity of a company:
The Commissioner General may treat the transfer of property by a shareholder of a company incorporated under the Companies Act, as having no realizable value, if such transfer is his contribution towards the equity of that company.
However, for exemption applications involving the transfer of shares or other properties in a re-organization, proof of ownership of the number of shares held must be made by attaching the relevant share certificate.
Under section 10 of the Property Transfer Tax Act, any determination or assessment for PTT may be objected to or appealed against by any affected person.
Objections against PTT assessments must be made in writing stating the grounds for objection. If the grounds of objection are not satisfactory, the assessment will be upheld. However, a taxpayer has a right to appeal to the Revenue Appeals Tribunal should they be dissatisfied with the Commissioner General's determination.
Refund of tax paid
There will be instances when a transanction is aborted for various reasons well after the tax has been paid and a tax clearance has been issued. Such cases will be refunded upon application. Applications for refunds will be scrutinized to ensure that the tax was actually paid. The following documents will be required:
(a). Original Tax Receipt
(b). Original Tax Clearance Certificate
(c). Original PTT Certificate
(d). Any proof that the transaction did not take place, (e.g. confirmation from the Registrar of Lands and Deeds)
(e). Formal letter of sale from the vendor, or their legal representatives
The following documents will be required:
(a). Copies of NRC for both the buyer and seller (in the case of individuals)
(b). A Certificate of Incorporation ( in the case of limited companies) or a certificate of registration (in the case of a Partnership);
(c). State consent to assign
(d). (d) Seller’s and buyer’s TPINs
(e). Contract of Sale/ Deed of Transfer or Gift
(f). Legal practitioner’s certification (where the legal practitioner is representing both parties; letters of administration or probate for deceased cases; and valuation report ( where ZRA requests for valuation report).
For transfer of shares:
(a). Share Transfer Form 27;
(b). PACRA form 2:
(c). Latest financial statement of the company in which the shares are held;
(d). Shareholders` resolution
(e). Return form
(f). TPIN for seller and for the buyer;
(g). Identification number for both the buyer and seller;
(h). Contract for sale;
(i). Certificate of share capital;
(j). Certificate of incorporation.
Group companies seeking nil transfers via internal re-organisations, will have to provide evidence of the existence of a group structure by presenting a Share Ownership certificate and will require to meet the definition of a group.