I'm not clear on the type of business you desire to start. Is it accounting or do you plan to crossover into marketing, export or importing?
My information here is too long for a single posting, so I am posting it in two (2) Parts.
Please do not take the following information as an attempt to be negative or discouraging. As an international business consultant and troubleshooter, I'm hired to overcome the obstacles facing new and established corporations. I am NOT making judgments about your country. I acknowledge the are MANY fine people living there and I am not making judgments here, but posing suggestions and food for thought. No more, no less!
According to the World Bank, African nations make it harder for entrepreneurs to succeed than other parts of the world. It appears it is very difficult in Zambia to do business because the government has not put in place many incentives to promote small entrepreneurs, such as business loans.
An interesting case history of someone trying to setup a new business in Zambia: http://asp.african-institute.org/articles.asp?Indeks=33
ministry of patents
There are 6 different papers to start with. You choose which kind of business you want to setup. If you wanted to start a charity firm you would have to pay 80 thousand kwacha. And the prices went up to 500,000 kwacha. There were also other attributes if you are interested in investing in Zambia as a citizen. These were; foreign exchange controls, capital gains tax, limits on ownership, property transfer tax on local shares, the company would be taxed at 60%, no T+3 Settlement, and many other scripted physical certificates would be needed.
Believe it or not!
It seems Zambians are punished if they want to invest or start business in their own country. The forms MUST be typed, not hand written. You would be in a better position if you invested into Zambia as an outsider. Because there are: No foreign exchange controls, no capital gains tax, no limits on foreign ownership, no property transfer tax on local shares, listed companies were taxed at 30%, T+3 Settlement, immobilization of Script-no physical certificates, and a foreign passport. Some people get citizenship with another country THEN start a business in Zambia. Then there are the MANY stories of governmental bribes. Even the president has a special project to attempt to reduce government corruption.
You will also notice something else; the demand for invoices and tax papers for every little thing the local people sold and bought. How can a government that does not create employment for the people demand the hard earned cash from the poor people? Why aren’t there rules that say, you must not pay tax until your business looks promising enough to start paying tax, or until you have begun earning a certain amount of money?
Zambia Revenue Authority has offices in all provincial capitals and most districts in the country - http://www.zra.org.zm/dtax/business_starter.htm
As soon as you start a business, you must inform your Local Tax Office. The Zambia Revenue Authority has offices in all provincial capitals and most districts in the country. If you have given up your previous employment, you should send your Local Tax Office Form P13 given to you by your last employer when you left.
You will have to keep full and accurate records and proper accounts from the start. It is a good idea to have a separate bank account for your business and your Bank Manager will advise you about this. If you wish to trade under a name other than your own, you may need to get advice about this from an Accountant or Lawyer.
Normally, Partners are jointly liable for all partnership debts. So if one of you fails to pay a share of any liability incurred by the business, including a tax debt, the creditors can look to the other partners to meet it.
A Partnership is not recognized for tax purposes as a separate legal entity. Instead, the Partners are taxed on the shares of their profits or income from the partnership. Each partner will therefore be required to submit a return of his/her own, each charge years.
Limited Liability Company:
Consider talking to an Accountant or Lawyer, first if you want to set up a Company. For tax purposes, the Company is a separate legal entity and it is taxed on the profits and any other income earned from the business.
Where YOU can go for more advice?
You do not have to use an accountant, but it is advisable to have someone to guide you on financial matters generally. An Accountant can also draw up your accounts and assist you to claim the relief you are entitled to. The tax Office will normally write to your accountant, if you have one, but we will send you directly the annual tax return forms and notices of assessment to tax.
What about PAYE for employees?
If you employ someone in your business, you may have to deduct tax from his/her earnings. If you are thinking of taking someone on, talk to your Inspector of Taxes, he will answer some of your questions about PAYE (Pay As You Earn)
What is an accounting date?
An accounting date is the date on which you decide to make up your accounts. If you have an Accountant, ask him for advice. Many people make up their accounts to the end of the first year’s trading and then on the anniversary of that date. Some prefer to make up their accounts for the calendar year ending 31st December or to the end of the tax year on 31st March, which is the same as the Income Tax Charge Year.
When you have chosen a date, it is advisable to stick to it and to make accounts every twelve months. If you choose an accounting date other than 31st March, you have to write to the Commissioner - Direct Taxes for approval.
Your Accountant, if you have one, will draw up your accounts. But whoever prepares them, you are still responsible for their accuracy and for correctly declaring the amounts of the profits. The Tax Office will need to be satisfied that the accounts you have supplied show the true results of the business that you are running.
Accounts presented to the Tax Office are usually in two parts:
The Profit and Loss account, which is a summary of the year’s trading transactions
The Balance Sheet which shows the “assets” and liabilities of the business.
You must keep full and accurate records from the start. You need to do this whether you draw up the accounts yourself, or have an Accountant to do it. It is important for you to remember that figures which are contained in your accounts or your tax returns, must be correct. It is a serious offence to understate your profits deliberately. If your records are not good enough to produce proper accounts, your tax might then be based on an estimate of your business activity and the tax could be higher than need be. So it is in your own interest to keep full and accurate records.
How are taxable profits arrived at?
It is not possible to summarize here all the rules for arriving at your profits for tax purposes, but it may help you to know the following:
You cannot deduct capital expenditure in working out your taxable profits.
Examples of Capital Expenditure include:
Cost of plant, machinery or vehicles;
And Purchase of business premises.
But some relief for this type of expenditure may be available through the capital allowances system.
You can normally deduct revenue expenditure which is incurred wholly and exclusively for the purposes of your business.
If you incur any expenditure partly for business purposes and partly for private purposes, you can only claim for the business part.
Your Tax Office can give you advice on these matters.
When are profits taxed?
The Income Tax year ends on 31st March, so the Income Tax Year beginning on 1st April, 2000 and ending on 31st March 2001 is called 2000/2001. And your assessment relates to a tax year. In general, your assessment for one tax year is based on your profits from trade in the 12 month period which ended in the previous tax year.
For example, if your accounts are regularly made up to 31st March, then the accounts for the year ended 31st March 2001, a date which falls in the tax year 2000/2001, will be used to work out your tax bill which you receive for the tax year 2000/2001.
When you submit the Return
You are required by law to make a true return of income by 30th September each year. Your income includes your business profits. You should send in your return together with your business accounts. If you do not do this - or your Tax Office is not satisfied that your accounts correctly show your business profits - an estimate of your profits will be made.
What happens if you disagree with the tax assessments?
If you disagree with any part of your assessment, you should object against it. You have 30 days from the date the notice of assessment was issued in which to do so.
Most objections or other disputed matters can be settled after discussion, between your self and our Tax Office. If you cannot agree, then the issue under dispute will be considered by the Revenue Appeals Tribunal. This is a Tribunal which settles disputes between Taxpayers and the Zambia Revenue Authority.
CONTINUED IN part 2 - See Below