There has been a lot of hype [1, 2, 3] about Zambia’s supposedly “Pro-Poor” 2012 budget… and rightfully so –it is perhaps the one most significant piece of evidence linking the Patriotic Front [4] to their Socialist agenda. The one thing everyone seems to be talking about though is the new PAYE Tax bands; and effective April 1, 2012 the new personal tax rates in Zambia be as depicted in table below.
| Income Tax Bands (ZMK) | Tax Rates (%) |
|---|---|
| ZMK 2,000,000 and Below | 0% |
| ZMK 2,000,001 - ZMK 2,800,000 | 25% |
| ZMK 2,800,001 – ZMK 5,700,000 | 30% |
| ZMK 5,700,000 and Above | 35% |
ZRA Tax Computation Guide
The constitution of Zambia –under the PAYE system– mandates employers to deduct gross payments using the following variables
- Total gross pay
- Tax bands
- Statutory deductions (e.g. NAPSA)
A key thing to bare in mind is that all statutory deductions are removed before the tax calculation. For instance if my greedy employers pay me ZMK 4,000,000.00 every month then the tax calculations would be as follows:
- STEP 1: Deduct NAPSA (mandatory statutory contribution)
| Amount (ZMK) | |
|---|---|
| Gross Income | 4,000,000 |
| NAPSA Deduction | 155,000 |
| Taxable Amount | 3,845,000 |
- STEP 2: Compute Tax Deductions
| Tax (ZMK) | |
|---|---|
| Initial 2,000,000 will be taxed at 0% | 0 |
| Next 800,000 of your remaining amount will be taxed at 25% | 200,000 |
| Next 1,045,000 of your remaining amount will be taxed at 30% | 313,500 |
| Balance of your remaining amount will be taxed at 35% | 0 |
| Total Tax payable | 513,500 |
- STEP 3: Compute Take Home
| Amount (ZMK) | |
|---|---|
| Gross Pay | 4,000,000 |
| NAPSA | 155,000 |
| PAYE | 513,500 |
| Take Home | 3,331,500 |
I have also set up an embedded spreadsheet caculator below that can be used to compute the PAYE tax when inputed with specific figures. Feel free to replace the existing figures with your own. Please leave a comment if you have a suggestion or if you notice an anomaly.
Please substitute only the figures in RED to compute tax and net pay for a desired amount.
More money in your pockets????
References
[1]https://www.facebook.com/groups/149657968431200/
[2]http://www.lusakatimes.com/2011/11/11/2012-full-budget-address-speech-finance-minster-alexander-chikwanda/
[3]http://www.zambianwatchdog.com/archives/26116
[4]http://www.patriotic-front.com/
[5]http://www.mlss.gov.zm/upload/SI/SI%20general.pdf
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