The Property Transfer Tax Act CAP 340 provides that whenever property is transferred, Property Transfer Tax (PTT) is charged upon and collected from, the person transferring the property (transferor) on the Realisable Value (i.e. Open Market Value or Contract Price, whichever is higher).
The term “property” means:
• Any land in Zambia (including any building, structure or other improvements thereon)
• Any share issued by a company incorporated in the Republic of Zambia
The rate of tax shall be 10% Realised Value
Property Transfer Tax is calculated on the Realizable Value of the property, that is, the price at which property could, at the time of transfer be sold on the open market.
- where the property to be valued is Land, the realized value shall be the price at which it could, at the time of its transfer, reasonably sold on the open market as determined by the Commissioner General
- Where the property to be valued is a share, the realized value shall be the price at which it could, at the time of its transfer, reasonably have been sold on the open market as determined by the Commissioner General Transfer
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. 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:
“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 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;
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.
Transactions as a result of the sale or other disposal of any stock or shares listed on the Lusaka Stock Exchange.
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 reorganization, proof of number of shares through a share certificate should be attached. A group of companies exists where there is a Holding or Parent & Subsidiary company relationship. This should be established and proved. Mere assertion of existence of a group does not suffice; neither is an application by “Sister Companies” under common ownership/shareholding, a basis of qualification for approval.
Objections to Values Under section 10 of CAP 340, any determination or assessment for PTT may be objected to or appealed against by any affected person. Objections against PTT assessments are settled based on their merit. If the grounds of objection or appeal are not satisfactory, the assessment will be upheld. A valuation report (from an approved valuation company) will be required for this purpose. The taxpayer has recourse through an appeal to the Revenue Appeals Tribunal (RAT).
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:
- Original Tax Receipt
- Original Tax Clearance Certificate
- Original PTT Return
- Any proof that the transaction did not take place, (e.g. confirmation from registrars at the Ministry of Lands or Local Authorities, though confirmation will not be restricted to this)
- Formal letter of sale from the vendor, or their legal representatives
Expired Certificates Certificates are issued with a period of validity in order to ensure that the title passes whilst the assessments is still current. Certificates, which expire due to an unreasonable delay by any of the parties to transfer, will be subjected to a reassessment of the realizable value. The higher value of the original assessment and the reassessed value will be taken. The following documents will be required:
Copies of NRC for both the buyer and seller (in the case of individuals), a Certificate of Incorporation ( in the case of limited companies) or a certificate of registration (in the case of a Partnership);
Contract of sale/Deed of Gift or Transfer;
Lawyer’s stamp (where a lawyer is representing both parties);
Order of appointment of Administrator/Court Order (for ALL deceased cases);
Valuation Report (for ALL transactions above K500Million)
For transfer of shares:
Share Transfer Form 27;
Latest financial statement of the company in which the shares are held;
TPIN for seller
Group companies seeking nil transfers via internal re-organizations, will have to provide evidence of the existence of a Group Structure by presenting a Share Ownership Certificate.