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HMRC internal manual

Double Taxation Relief Manual

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DT: Zambia: double taxation agreement, Article 23: Elimination of Double Taxation

(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof)-

(a) Zambia tax payable under the laws of Zambia and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Zambia shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Zambia tax is computed. Provided that in the case of a dividend the credit shall take into account only such tax in respect thereof as is additional to any tax payable by the company on the profits out of which the dividend is paid and is ultimately borne by the recipient without reference to any tax so payable.

(b) In the case of a dividend paid by a company which is a resident of Zambia to a company which is a resident of the United Kingdom and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Zambia tax for which credit may be allowed under the provisions of sub-paragraph (a) of this paragraph) the Zambia tax payable by the company in respect of the profits out of which such dividend is paid.

Article 23(1A) was inserted by SI81/1816

(1A) For the purposes of paragraph (1) of this Article the term `Zambia tax payable` shall be deemed to include any amount which would have been payable as Zambia tax for any year but for an exemption or reduction of tax granted for that year or any part thereof under-

(a) Sections 19 and 20 of the Pioneer Industries (Relief from Income Tax) Act, CAP666, and Section 20(f) of the Industrial Development Act 1977, so far as they were in force on, and have not been modified since, the date of signature of the Protocol amending this Convention or have been modified only in minor respects so as not to affect their general character; or

(b) any other provision which may subsequently be made granting an exemption or reduction of tax which is agreed by the competent authorities of the Contracting States to be of a substantially similar character, if it has not been modified thereafter or has been modified only in minor respects so as not to affect its general character.

Provided that relief from United Kingdom tax shall not be given by virtue of this paragraph in respect of income from any source if the income arises in a period starting more than ten years after the exemption from, or reduction of Zambia tax was first granted in respect of that source.

(2) Subject to the provisions of the law of Zambia regarding the allowance as a credit against Zambia tax of tax payable in a territory outside Zambia (which shall not affect the general principal hereof)-

Article 23(2)(a) was substituted by SI81/1816 as below;

(a) United Kingdom tax payable under the laws of the United Kingdom and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within the United Kingdom shall be allowed as a credit against any Zambia tax computed by reference to the same profits, income or chargeable gains by reference to which the United Kingdom tax is computed. Provided that in the case of a dividend the credit shall take into account only such tax in respect thereof as is charged on the recipient under paragraph (2) or under paragraph (3) (a) (ii) of Article 11 and credit shall not be allowed in respect of any tax payable by the company on the profits out of which the dividend is paid.

(b) In the case of a dividend paid by a company which is a resident of the United Kingdom to a company which is a resident of Zambia and which controls directly or indirectly at least 10 per cent of the voting power in the United Kingdom company, the credit shall take into account (in addition to any United Kingdom tax for which credit may be allowed under the provisions of subparagraph (a) of this paragraph) the United Kingdom tax payable by the company in respect of the profits out of which such dividend is paid.

(3) For the purposes of paragraphs (1) and (2) of this Article profits, income and capital gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other Contracting State.