2022 National Budget opinion piece – TAX INCENTIVES WILL BOOST FOREIGN DIRECT INVESTMENT

The outbreak of the Coronavirus disease 2019 (Covid-19) was a global public health crisis, that hit the Zambian economy and the world economy hard. We believe that the reintroduction of tax incentives will encourage investment and give investors the necessary relief they need to recover from the disastrous impact of Covid-19.

To note further that the Government in its quest to foster entrepreneurship and ensure that Zambian citizens are at the forefront in driving industrialization has reduced the investment threshold for a Zambian citizen operating in the MFEZ and industrial park to USD 50 000.00.

Further, the Minister of Finance announced the following additional incentives for those looking to invest in the MFEZ or industrial park:

    1. 0% tax for a period of 10 years from the first year of commencement of works in an MFEZ or industrial park, on dividends declared on profits made on exports;

    2. 0% tax for a period of 10 years from the first year of commencement of works in an MFEZ or industrial park, on profits made on exports; and

    3. taxation on profits made on exports by companies operating in the MFEZs and industrial parks to increase to 50% of profits for years 11 to 13 and 75% of profits for years 14 and 15.

We believe that these incentives are meant to restructure the MFEZ and industrial parks into exporting processing zones. Further, the ring-fencing of the incentives will ensure a level playing field between businesses in the MFEZ and those outside when selling their products in the domestic market.

The Author, Jackie Jhala, is a Partner in the Firm’s Corporate Advisory Department.