Update (January 12, 2018): (1) New NAPSA ceiling is ZMW 995.00. (2) Tax relief for pension contributions removed 🙁 (see budget speech).
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.
TL;DR
I have set up a PAYE tax calculator below that can be used to compute the PAYE tax when inputed with specific figures. Feel free to replace the required input values with your own. Please leave a comment if you have a suggestion or if you notice an anomaly.
Income Tax Bands
| Income Tax Bands (ZMW) | Tax Rates (%) |
|---|---|
| 3,300.00 and Below | 0% |
| 3,300.01 – 4,100.00 | 25% |
| 4,100.01 – 6,200.00 | 30% |
| 6,200.00 and Above | 37.5% |
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 a proportion of statutory deductions are removed before the tax calculation—the amount deducted is either 15% of total statutory contributions or ZMW 255.00, whichever is the minimum. For instance if my greedy employers pay me ZMW 4,000.00 every month then the tax calculations would be as follows:
- STEP 1: Deduct Statutory Contributions (Mandatory statutory contribution)
| Amount (ZMW) | |
|---|---|
| Gross Income | 4,000.00 |
| Max. Allowed Deduction | 255.00 |
| Taxable Amount | 3,745.00 |
- STEP 2: Compute Tax Deductions (Using taxable input from STEP 1 as input)
| Tax (ZMW) | |
|---|---|
| Initial 3,300 will be taxed at 0% | 0 |
| Next 445 of your remaining amount will be taxed at 25% | 111.25 |
| Next 0 of your remaining amount will be taxed at 30% | 0 |
| Balance of your remaining amount will be taxed at 37.5% | 0 |
| Total Tax payable | 111.25 |
- STEP 3: Compute Take Home
| Amount (ZMW) | |
|---|---|
| Gross Pay | 4,000.00 |
| NAPSA (5% of Gross Pay with Ceiling of ZMW 894.61) | 200.00 |
| PAYE | 111.25 |
| Take Home | 3,688.75 |
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
