Zambia: Amendments to country-by-country reporting rules
Zambia: Amendments to CbC reporting rules
Amendments to regulations relating to the country-by-country (CbC) reporting requirements in Zambia are effective 1 January 2021, and are applicable for years of assessment ending on or after 31 December 2021.
Under the measures, a CbC report must:
- Be filed no later than 12 months after the last day of the reporting accounting year of the multinational enterprise (MNE) group
- Contain information pertaining to aggregate financial information of each country in which the MNE operates
- Set out the details of each entity of the MNE and that entity’s tax residence, the law under which the entity was established, and the nature of the entity’s business activities
- Be filed with the Zambia Revenue Authority if the ultimate parent entity (UPE) of an MNE is a tax resident in Zambia and has an annual consolidated revenue exceeding €750 million (or 4,795 million Kwacha)
From a Zambian perspective, a UPE is an entity within an MNE that holds significant interest in one or more of the entities within that MNE. A UPE is required to prepare consolidated financial statements under the accounting principles followed in the UPE’s tax residence.
The amended regulations provide further that when an entity that is tax resident in Zambia and is not the UPE, that Zambian entity must file a CbC report in Zambia if:
- The UPE is not required to file a CbC report in its country of tax residence
- The country in which the UPE is tax resident experiences a system failure, or
- A suitable agreement for the exchange of CbC-related information between the country in which the UPE is a tax resident and Zambia did not exist at the time when the entity is required to file a CbC report
If more than one entity belonging to an MNE is tax resident in Zambia, then the group may elect one of the entities to file a CbC report and notify the Zambia Revenue Authority of this. In addition, a surrogate parent entity may file a CbC report in its jurisdictional state, which will have the effect of the Zambian tax resident entity being excluded from filing obligations if certain requirements are met. A surrogate parent entity is an entity that is part of an MNE and has been appointed by the group to be a substitute UPE.
CbC notification requirement
A tax resident entity of Zambia must notify the Zambia Revenue Authority whether it is the UPE or a surrogate entity. When this Zambian entity is neither the UPE nor a surrogate parent entity, it must notify the tax authority of its identity and tax residence.
Additional CbC amendments
The purpose and use of CbC reports are expressly set out in the amendments to the regulations for the following purposes:
- Assessing transfer pricing risks;
- Assessing the risk of non-compliance by members of an MNE
- For economic and statistical analysis
Furthermore, the Zambia Revenue Authority cannot use CbC reports as a basis for implementing transfer pricing adjustments.
Finally, the amended regulations stipulate that the Zambia Revenue Authority must keep the details of the CbC report confidential.
Zambia has significantly improved its CbC reporting rules and MNEs having a presence in Zambia need to be aware of these measures. The preparation of transfer pricing documentation including CbC reports and compliance with information disclosure and filing rules is essential, and taxpayers ignoring this development may be at risk from a transfer pricing perspective.
Read an April 2021 report [PDF 101 KB] prepared by the KPMG member firm in South Africa
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