Property Transfer Tax – The Tax that Applies to Property Transactions

This is a two part article on Property Transfer Tax, an important tax that is applicable to property transactions.

What is Property Transfer Tax (PTT)?

Whenever property is being bought and sold, the tax authorities – in our case Zambia Revenue Authority (ZRA) – demand a certain payment of tax known as Property Transfer Tax (PTT).  The law defines property as being land, shares and mining rights.  For the purposes of this article and our diaspora audience, we will only discuss PTT on land sales.

How much is PTT?

After reaching a peak of 10%, PTT is now charged at 5% of the value of the land.  It’s important to distinguish between value and purchase price.   ZRA has the right to determine the value of a property which may be higher than the seller has agreed to sell the property for.  So for instance, a seller may find a buyer for her property amounting to K350,000 but ZRA may believe the real value of that property is K500,000.  ZRA will then assess the property at that higher value and demand 5% of that value to be paid as PTT.  It is now standard practice for ZRA to demand property valuation reports for properties being sold for over K500,000.  In charging the 5% PTT rate, ZRA will choose the higher amount between the valuation and the purchase price.

Who pays PTT?

Usually the receiver of income pays PTT, as a result PTT is paid by the seller.  However, it is common practice for many developers to pass on this cost to the buyer and to stipulate this in the contract.  Many developers are wary of high and unpredictable hikes in PTT as was experienced in 2014 when PTT was doubled from 5% to 10%.  So many sellers want to pass on this risk of escalation to the buyer.  It’s critical when buying a property at home to understand if the price includes PTT or not.

This is the end of Part 1 of this two part series on Property Transfer Tax.  In our next newsletter, we’ll conclude this series with Part 2.

Please note that the above information is intended to provide general information only. The contents contained in this article do not constitute legal or tax advice and should not be relied on as such. For legal or tax advice please contact a licensed legal or tax professional.

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