When a Zambian business makes a payment to a company or individual in another country, Withholding Tax (WHT) is deducted at the domestic rate - typically 20% for non-residents. But if the recipient is in a country that has a Double Taxation Agreement (DTA) with Zambia, the rate may be significantly lower.
This article covers Zambia's 23 treaty partners, the reduced rates available, and how to claim treaty benefits. Use our Withholding Tax Calculator to compare domestic and treaty rates for any payment.
What are Double Taxation Agreements?
A DTA (also called a Double Tax Treaty or Tax Convention) is a bilateral agreement between two countries that prevents the same income from being taxed twice. Without a DTA, a non-resident receiving dividends from Zambia would pay 20% WHT in Zambia and potentially full income tax in their home country on the same amount.
DTAs resolve this by agreeing reduced rates at source (the Zambia side) and providing credits or exemptions in the home country. For cross-border businesses, DTAs can reduce tax costs substantially.
Why DTAs matter for cross-border payments
Consider a UK company licensing software to a Zambian firm. The royalty payments attract WHT. Without the DTA, Zambia deducts 20%. With the UK DTA, the rate drops to 5% - a 75% reduction in the tax withheld at source. For large recurring payments, the savings compound significantly.
DTAs affect three main categories of passive income:
Dividends - returns paid to foreign shareholders
Interest - payments on cross-border loans and deposits
Royalties - fees for intellectual property, patents, trademarks, and technical know-how
Zambia's 23 treaty partners
The following table shows the reduced WHT rates available under each treaty. Where two rates are shown (e.g. 5%/15%), the lower rate applies when the beneficial owner holds a qualifying minimum ownership percentage (typically 10-25%).
Country | Dividends | Interest | Royalties |
|---|---|---|---|
Botswana | 5%/7% | 10% | 10% |
Canada | 15% | 15% | 15% |
China | 5% | 10% | 5% |
Denmark | 15% | 10% | 15% |
Finland | 5%/15% | 15% | 5%/15% |
France | 20% | 20% | 0% |
Germany | 5%/15% | 10% | 10% |
India | 5%/15% | 10% | 10% |
Ireland | 7.5% | 10% | 8%/10% |
Italy | 5%/15% | 10% | 10% |
Japan | 0% | 10% | 10% |
Kenya | 20% | 20% | 20% |
Morocco | 10% | 10% | 10% |
Netherlands | 5%/15% | 10% | 7.5% |
Norway | 5%/15% | 10% | 10% |
Seychelles | 5%/10% | 5% | 10% |
South Africa | 20% | 20% | 20% |
Sweden | 5%/15% | 10% | 10% |
Switzerland | 5%/15% | 10% | 5% |
Tanzania | 20% | 20% | 20% |
Uganda | 20% | 20% | 20% |
UAE | 5% | 5% | 5% |
United Kingdom | 5%/15% | 10% | 5% |
Countries with the most favourable rates
Some treaties offer notably better rates than others:
UAE - 5% across all three categories (dividends, interest, and royalties). The most uniformly favourable treaty.
Japan - 0% on dividends (the only treaty with full dividend exemption), 10% on interest and royalties.
France - 0% on royalties, though dividends and interest remain at the domestic 20%.
United Kingdom - 5% on royalties and 5%/15% on dividends (5% for qualifying shareholders), 10% on interest.
China - 5% on dividends and royalties, 10% on interest.
Switzerland - 5% on royalties and 5%/15% on dividends, 10% on interest.
Seychelles - 5% on interest (the lowest interest rate alongside UAE).
Countries where the treaty equals the domestic rate
Four East African neighbours have treaties with Zambia, but the agreed rates match the domestic non-resident rates:
Kenya - 20% on dividends, interest, and royalties
South Africa - 20% on dividends, interest, and royalties
Tanzania - 20% on dividends, interest, and royalties
Uganda - 20% on dividends, interest, and royalties
These treaties still provide benefits beyond rates - they establish certainty, define permanent establishment rules, and provide mutual agreement procedures for disputes. But for WHT purposes, there is no rate reduction.
How to claim treaty benefits
Treaty rates do not apply automatically. The non-resident payee must obtain advance clearance from ZRA before the payment is made. The process typically involves:
The non-resident obtains a Certificate of Tax Residency from their home country's tax authority
The payer or payee submits an application to ZRA's International Tax Division with the certificate and details of the payment
ZRA issues a directive confirming the applicable treaty rate
The payer deducts WHT at the approved treaty rate instead of the domestic rate
Important: If the payer deducts at the domestic rate without applying for treaty relief, the non-resident must apply to ZRA for a refund of the excess - which can be a slow process. It is always better to obtain clearance in advance.
Worked example
A Zambian company pays K500,000 in royalties to a UK company for software licensing.
Without the DTA (domestic rate)
WHT = K500,000 x 20% = K100,000
Net payment to UK company = K400,000
With the UK DTA (treaty rate)
WHT = K500,000 x 5% = K25,000
Net payment to UK company = K475,000
Saving: K75,000 per payment. For recurring quarterly royalties, that is K300,000 per year retained by the UK company. The Zambian payer also benefits because the lower withholding amount reduces the total contract cost negotiated with the foreign supplier.
Frequently asked questions
How do you claim a reduced treaty rate?
The non-resident payee must obtain a Certificate of Tax Residency from their home country and submit it to ZRA's International Tax Division before the payment is made. ZRA then issues a directive confirming the reduced rate. Without advance clearance, the domestic rate applies and the excess must be claimed as a refund.
Do treaty rates apply automatically?
No. Treaty rates require advance clearance from ZRA. The payer must not apply the reduced rate on their own initiative. If the payer deducts at the treaty rate without ZRA approval, they risk being assessed for the shortfall (the difference between the domestic rate and the treaty rate), plus penalties and interest.
Which country has the lowest WHT rates under treaty?
The UAE offers the most uniformly low rates: 5% on dividends, 5% on interest, and 5% on royalties. Japan has the lowest single rate - 0% on dividends - but its interest and royalties rates are 10%. For royalties specifically, France and the UK both offer 5% or lower.
See also: How Withholding Tax works in Zambia for a complete guide to all WHT categories and rates, and WHT final tax vs credited to understand when WHT settles the full tax obligation.