Zambia

Tax and financial measures associated with COVID-19

23 April 2020

Zambia has recorded a total of 76 cases, 3 deaths and 37 recoveries as at 23rd April 2020. Zambia’s economy has equally been affected by the Pandemic as the rest of the world. The IMF projects that the economy will grow by a negative 2.6% in 2020 from the earlier projection of 3.6%. The economic adjustments due to COVID-19 will result in severe drop in revenue as the scaling down of economic activity has cut across all sectors.

Tax measures

  • Waiver of Tax penalties and Interest; the Government has waived tax penalties and interest on outstanding tax liabilities. The Revenue Authority is yet to issue specific guidelines.
  • Suspension of customs duties and VAT on medical supplies and equipment required in the fight against COVID-19.

Social security measures

  • The government has released funds to the Public Pensions Service Fund to pay retirees

Employee and employer supportive measures

  • Partial Lockdown/ Employees encouraged to work from home to avoid the spread of COVID-19.
  • No specific supportive measures from the government so far

Business support

  • Easing of Liquidity. To alleviate the economic pressures associated with COVID-19 liquidity challenges, especially to financial institutions degenerating into a solvency problem, the Zambia Government has released funds to:
    • Public Pensions Service Find to pay retirees (Social security)
    • Banks to clear third party debt arrears
    • Local Contractors and supplier’s debt
  • The Central bank has announced a medium-term refinancing facility for eligible commercial banks and non-bank financial institutions to restructure, refinance or extend credit to businesses and households impacted by COVID-19 on more favourable terms.
  • Tapping in Opportunities for local agriculture production and value chain development. A taskforce has been established maximise on this opportunity.

Accounting implications

The effects of COVID-19 may have significant effects on how IFRS 9 is applied especially for the financial sector, specifically the impact of IFRS 9 on provisioning in view of COVID-19. Guidance has been issued by the Zambia Institute of Chartered Accountant (ZICA) on a number of aspects on how the IFRS 9 framework works, with the aim to provide clarity to the Zambian banking and non-banking financial services sector on how to handle in a consistent manner, aspects related to:

  • The classification of loans in default;
  • The identification of forborne exposures and
  • The accounting treatment

Other

  • Tapping in Opportunities for local agriculture production and value chain development. A taskforce has been established maximise on this opportunity.
  • Multi-lateral organisation engagements for various windows of support. Zambia is engaging the IMF, the World Bank, African Development Bank and Afreximbank to be considered for support under their COVID-19 Emergency funds.

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