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ZAMBIA - MAURITIUS
DOUBLE TAXATION AGREEMENT
IMARA TRUST COMPANY (MAURITIUS) LIMITED
Zambia - Mauritius Double Taxation Agreement
provides new alternatives for investing into Zambia
Zambia is an attractive investment destination offering various lucrative investment opportunities in
tourism, agriculture, manufacturing, energy and mining. The investment climate is characterized by a
stable macroeconomic environment, stable political system, investment guarantees and security, duty
free access to regional, wider Africa and USA markets and unrestricted repatriation of after-tax profits.
Zambia has signed double taxation agreements with a number of European, North America, African and
Asian countries. The double taxation agreement with Mauritius offers one of the most conducive terms
and combined with the attractive Mauritius holding company regime, may reduce the cost of doing
business in Zambia.
Zambia’s Tax Stucture
Zambia has a corporate tax rate of 35%, with some exceptions where it could be lower or higher. It also has withholding tax
rates (WHT) of 15% under domestic tax laws, on the following:
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Dividends (some companies declaring dividends and covered under incentives schemes are exempt from WHT on
dividends, for example companies in agribusiness and large-scale mining companies)
Interest
Royalties, Management and Consultancy Fees
Rents
Interest on treasury bills, and Commissions
Mauritius resident company using the treaty
Nature of income
WHT without treaty
WHT with treaty
Apparent Savings
Dividends
15%
5 % (see note 1 below)
10%
Interest
15%
10%
5%
Royalties
20%
5%
15%
Management & Consultancy Fees 20%
0% (see note 2 below)
20%
Commissions
0% (see note 2 below)
20%
20%
Capital Gains - currently these are exempt both under the domestic laws of Mauritius and Zambia. Also see note 2 below:
Notes:
(1)
5 % is applicable if the beneficial owner is a company which holds at least 25% of the capital of the company paying the dividend. In other cases,
the WHT will be 15%.
(2)
Such nature of income has not been specifically dealt with in the Articles of the DTA. Thus, a view can be taken that it falls under the residuary
clause i.e. Article 21 of the DTA, which mentions that “items of income of a resident of a Contracting State, wherever arising, not dealt with in
the foregoing Articles of this Agreement shall be taxable only in that State”. While this is matter of expert tax opinion, however, a view can be
taken that such income will thus not be taxable in Zambia, if the income is earned by a Mauritius resident. Hence the WHT is assumed to be 0%.
Also, while there is no capital gains tax in Zambia for the moment, if it is imposed in the future and the treaty remains unchanged, the same
may also get covered under the above Article 21 of the DTA and could thus be exempt.
ZAMBIA - MAURITIUS DTA
© 2015 Imara Trust Company (Mauritius) Limited. All rights reserved.
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Zambia - Mauritius DTA
Mauritius allows underlying tax credit both under the domestic laws (subject to some conditions) and under the DTA. This
means that, besides the credit of actual WHT imposed on income arising from Zambia, in the case where dividends are
received by a Mauritius company from a Zambian company and the Mauritius company holds more than 5% of the shares,
the tax paid by the Zambian company on the profits from which such dividend has been declared will also be allowed as a
set off against Mauritius tax.
Mauritius also allows tax sparing credit both under the domestic laws (subject to some conditions) and under the DTA,
which means that, even where tax on profits of Zambian company are reduced or waived under some incentive schemes,
Mauritius will assume as if normal taxes have been paid and credit for the same will be allowed against Mauritius tax. It is
important to note that Category 1 Global Business Companies (GBC1) in Mauritius, besides being entitled to DTA benefits,
are also allowed to certain tax benefits under domestic tax laws of Mauritius, such as:
•
Deemed tax credit of 80% on foreign sourced income. The normal tax rate in Mauritius is 15% and post this deemed tax
credit of 80% the maximum rate at which such foreign sourced income will be taxed is only 3%. This could be reduced
to 0% in cases where actual tax suffered (WHT, underlying tax or tax sparing credit) on such income is equal to or more
than 15%; and
•
GBC1 companies are not subjected to any WHT on Dividends, Interests and Royalties, when paid to a non-resident.
Thus a GBC1 company, along with the DTA benefits, could help in using Mauritius as a very attractive platform to structure
investments in Zambia. To avail itself of the treaty benefits, the GBC1 company will need to show substance and be
managed and controlled in Mauritius.
Zambia has DTAs with other African countries like Kenya, Tanzania, and Uganda. While the WHT on Dividend, Interest &
Royalty is nil under such treaties, it is however subject to the condition that the income is subjected to tax in these
jurisdictions. As the corporate tax rates in these jurisdictions are also quite high, there is thus no real advantage to having
nil WHT.
The provisions of the Mauritius-Zambia DTA shall apply:
(a) In Mauritius, on income for any income year beginning on or after 1 July 2012
(b) In Zambia, with regard to taxes withheld at source and other taxes, in respect of amount paid or credited on or after 1
August 2012.
IMARA TRUST COMPANY (MAURITIUS) LIMITED
1001 Alexander House
35 Ebene Cybercity
Republic of Mauritius
Tel: +230 466 9171
Fax: +230 4660132
services@imara.mu
www.imara.mu
ZAMBIA - MAURITIUS DTA
© 2015 Imara Trust Company (Mauritius) Limited. All rights reserved.
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