How to Calculate Turnover Tax in Zambia (2026)

Turnover tax is Zambia's simplified tax regime for small businesses. Instead of tracking expenses, claiming deductions, and computing profit, you pay a flat 5% on your gross turnover. This guide explains exactly how it works, who qualifies, and how to calculate what you owe each month.

Use our turnover tax calculator to compute your liability instantly.

How turnover tax works

Turnover tax replaces income tax for eligible businesses. Rather than calculating taxable profit (revenue minus expenses), you simply apply a 5% rate to your total sales or revenue for the month. No deductions, no allowances, no capital claims.

The trade-off: Simplicity in exchange for not being able to deduct expenses. If your business has high costs relative to revenue, turnover tax may result in paying more than you would under income tax.

Who qualifies

To use the turnover tax regime, your business must meet all of these conditions:

• Annual gross turnover of K5,000,000 or less

• Annual gross turnover above K12,000 (businesses with turnover of K12,000 or less are exempt)

• Not in an excluded category (consulting, mining, partnerships, PSV operators)

• Not voluntarily registered for VAT

• Not earning income subject to final withholding tax

If your turnover exceeds K5,000,000 during the year, you must switch to the standard income tax regime from the following tax year.

Step-by-step calculation

Let's work through an example. Say your shop made K85,000 in total sales this month.

Step 1: Determine your gross turnover

Add up all sales, fees, and receipts for the month. This is your gross turnover - the total amount your customers paid you, before any expenses.

Gross turnover for the month = K85,000

Step 2: Apply the 5% rate

Multiply your gross turnover by the turnover tax rate:

Turnover tax = K85,000 x 5%
Turnover tax = K4,250

Exemption floor: If your annual gross turnover is K12,000 or less, you are exempt from turnover tax entirely. This threshold exists to exclude very small, subsistence-level activities from the tax net.

Step 3: File and pay

Submit your turnover tax return and payment by the 14th of the following month. For our example, if the K85,000 was earned in March, payment is due by 14 April.

Late filing penalty: K75 per month (250 penalty units) for each month or part thereof that the return is overdue. Interest also accrues on unpaid tax.

More examples at different turnover levels

Notice that K416,667 per month is the approximate ceiling. If your monthly turnover consistently exceeds this, your annual turnover will breach the K5,000,000 threshold and you will need to move to income tax.

Record keeping requirements

Even though turnover tax is simplified, ZRA still requires you to:

• Keep records of all sales and receipts

• Retain records for at least 6 years

• Be able to substantiate your declared turnover if audited

You do not need to keep detailed expense records for turnover tax purposes, but it is good practice to do so in case you later switch to the standard income tax regime.

When turnover tax may not be the best option

Because turnover tax is charged on gross revenue with no deductions, it can be expensive for businesses with thin margins. Consider this comparison:

At an 80% profit margin, turnover tax saves you significantly. But at a 5% margin, you are paying tax on revenue that is almost entirely consumed by costs. If your expenses are high relative to revenue, consult a tax adviser about whether standard income tax might be cheaper.

For a side-by-side comparison of the two regimes, see Turnover tax vs VAT in Zambia. To understand which businesses are excluded, read Turnover tax exclusions.

Sources

• ZRA - Turnover Tax

• Income Tax (Amendment) Act No. 22 of 2024