CAPITAL ALOWANCES RATES FOR ASSETS
Below is an example of how capital allowances can beclaimed on business gains, profits and emoluments of any
employment or office.
EXAMPLEA factory building was completed on 31st December 2013at the cost of K200, 000 and was brought into first use on 1stJanuary 2014. What are the capital allowances to beclaimed in the next three years?
Charge year2014
Cost of the building
K200, 000.00
Initial allowance at 10%
20,000.00
Wear and tear allowance at 5%
10,000.00
K30, 000.00
The income tax written down value as on 31/12/2014
K170, 000.00

General

Type

Rates

Comment

Furniture&Fittings,
Computers
Motor Vehicles – Commercial
Non-commercial
vehiclesPlant, Machineryand Equipment
Buildings
Industrial
Commercial
Investment
allowanceonindustrial buildings
Initial allowance on
industrial buildings
Manufacturing, Motor vehicles
Tourism
Plant, Machinery,
Equipment
Farming
Plant, Machinery,
Equipment

25%

Used in business

25%
20%

Used in businessIndirectly used in business

Motor vehicles
Farm improvements

50%
100%

Buildings,
implements,
machinery

100%

25%
5%
2%
10%

10%
50%
50%
100%

Charge year
2015
Wear and tear allowance at 5% on cost
K10, 000.00
The income tax written down value as at 31/03/2006
K160, 000.00
Charge year
2016
Wear and tear allowance at 5%
K10, 000.00
The income tax written down value as at 31/03/2007
K150, 000.00

MiningDirectly used in the trade

Exclusively and directly
used in farming or agro processing (owned by theclaimant and brought into
use effective 1st January
2017 )
Directly used in the trade
Definition: Fifth schedule,Part I, Paragraph 1

Because the cost of depreciation isn't allowable for tax,
capital allowances compensate for this by letting thebusiness deduct the capital allowance from its profit
before working out the tax.

The amounts to be allowed as deductions in theascertainments of taxable profits would be K30, 000.00 in
the first year of use and K10, 000.00 for the subsequentyears.
DO WE HAVE ANY DEFINED WEAR AND TEARALLOWANCES PROVIDED FOR IN THE INCOME TAX
ACT?
Yes, find below the list of assets and the wear and tearallowances classified below:

For more information contact:+260 211 381111/ 0971-281111/5972 / 0962251111
Email us at: advice@zra.org.zm
Website: www.zra.org.zm

CAPITAL
ALLOWANCESINTRODUCTION
It is a general rule that in computing income or profits of abusiness or trade, no deduction can be made either forcapital expenditure incurred or, for depreciation of assets
acquired by such capital expenditure, instead capitalallowances can be deducted.
What are Capital Allowances?
Capital allowances are deductions a business can claim
for wear and tear of qualifying fixed assets bought andused in a trade or business.
Under Section 33 of the Income Tax Act, Capital
Allowances are to be deducted in ascertaining the gains or
profits of a business and the emoluments of any
employment or office for each charge year
Capital Allowances are claimed for wear and tear of
qualifying fixed assets which includes;üBuildingsüImplements
üPlant and MachineryüFixtures and fittingsüMotor Vehicles and many other capital assets
used in the production of income.
Capital allowances apply to both tangible capital assets
and intangible ones (like the purchase of a patent, forexample. In the case of intangible assets, it is called apremium allowance and it shall not exceed the amountof the premium or like consideration divided by the numberof years for which the right of the use is granted (5thschedule, paragraph 14)
Do all capital items attract capital allowances?
The mere purchase of capital items does not warranty
eligibility for that asset to enjoy capital allowances but
according to the Income Tax Act (ITA) CAP 323 the asset
must be put to use in the business.
Further capital allowances are also granted for capital
expenditure in relation to mining operations and farmimprovements and works for those in the farming industry.
CAPITAL ALLOWANCES AND WEAR AND TEARRATESCapital allowances are to be provided for as per tablebelow for the charge year 2019:

Details
Initial allowance for industrial building
Wear and Tear allowance forindustrialbuildings (low cost housing)
Improvement allowance (comm ercialand industrial buildings)
Wear and tear allowance for otherindustrial buildings
stInvestment allowance (1year ofmanufacturing)
Wear and tear allowance forCommercial buildings
Wear and tear allowance for:
Implements
Machinery and plant
Office equipment
Office furniture
Commercial vehicles
Wear and tear for non-commercialvehicles
Plantandmanufacturing(manufacturing)
Farm improvement allowance
Farm works allowance
Development allowance
Farming implements
Plant and Machinery (farming)

Capital Allowances
10%
10%
100%

5%
10%
2%

25%

20%
50%
100%
100%
10%
100%
100%

Below are the definitions of items that are covered undercapital allowances.
üIndustrial buildings – means a building or structure in
use for the purposes of any electricity, gas, water,inland navigation, transport, hydraulic power, bridgeor tunnel undertaking, or any like undertaking of
public utility, or is in use for the purpose of any trade
which is carried on in a mill, factory or like premises;- consists of the manufacture of goods or materials,
or their subjection to any process;- consists of the storage of goods or materials tobe used in the manufacture or processing ofother goods;- consists of the storage of goods on import or forexport; or- consists in working of a mine or well for theextraction of natural deposits.
üCommercial buildings – means a building or
structure, or part thereof, which is not an industrial
building (as defined above) or farm improvement or
farm works (as defined in the sixthschedule of the ITA Cap323), and which is in use for the purposes of anybusiness.
üFarm dwelling – means a permanent building, used
as a dwelling (the original cost of which is taken for
purposes of this part as not in excess of twenty
thousand kwacha), which is not used by the farmer
claiming the allowance as his homestead of himself
and his family.
üFarm improvement – means any permanent work,
including a farm dwelling and fencing appropriate tofarming and any building constructed for and used
for the welfare of employees, and in relation tofarming land owned or occupied by the farmer
claiming the allowance.
IS THERE ANY CLASSIFICATION OF EXPENDITURE
IN THE INCOME TAX ACT?
Yes, expenditure is classified in two ways as follows:
1 Revenue expenditure;
2 Capital expenditure.
WHAT IS REVENUE EXPENDITURE?
Revenue expenditure is the cost incurred by a business orindividual that will recur year by year. To mention a few,
these are rental payments, production costs, salaries andwages, telephone bills etc.
HOW IS REVENUE EXPENDITURE TREATED INCOMPUTING INCOME OR PROFITS OF BUSINESES?
Revenue expenditure is allowed as a deduction inascertaining the gains or profits or emoluments of any
office in the year they are incurred.
WHAT IS CAPITAL EXPENDITURE?
Capital expenditure are costs incurred in acquiring assetsthat are used in a business for a period of one year, ormore and just to mention a few; industrial buildings,commercial buildings, computers, fixture and fittings,
mining equipment etc.
HOW SHOULD ASSETS OF A CAPITAL NATURE BE
TREATED IN THE DETERMINATION OF TAXABLEPROFITS?
Capital allowances at the rates provided are to be
deducted instead of depreciation for assets of a capitalnature before arriving at the taxable profits.
Under the Income Tax Act section 33, capital allowances
are deductible in ascertaining the gains or profits of abusiness and emoluments of any employment or office foreach charge year as wear and tear allowances over the lifeof an asset.