16 Jan 2024
No matter how hard you try and never mind how much you understand it, taxation is a matter better left to the experts to opine about.
But you wish it were that simple!
The matter of taxation concerns you one way or the other, and it concerns the migrants more than it concerns others. Particularly the migrants from Zambia who travel to developed countries to earn a living and send money to Zambia back home to offer financial support.
Learning about taxation as an expatriate is extremely important as you travel to developed countries to find better financial prospects. In developed countries, nothing in the economy is considered as important as taxation, and justifiably so because the economies of almost all developed countries stand firmly on the foundation of a solid taxation system and infrastructure.
This is one of the reasons why in most developed countries, the state and the governments take care of their people as if the citizenry is a newborn baby requiring incubating care due to fragile health!
The penalty for evading taxes in several developed countries is stern, leading to a low incidence of tax evasion, with sporadic cases of tax evasion being exceptions rather than the norms.
Therefore, basic information about taxation matters is of critical importance to you, particularly if you are a migrant residing in another country.
While giving expert taxation advice is neither an objective of this blog nor the intention, an overview of taxation and all the necessary details are explained below.
According to a report by Macrotrends, about 127,915 Zambian migrants lived in different countries worldwide in 2010. These migrants travel to other countries to earn a living as their families face acute financial constraints due to the country’s poor economy (Zambian economy is touched briefly below).
These Zambian migrants, according to a report by The Global Economy, sourcing data from the World Bank, sent in $241.69 million in inward remittances to Zambia in 2021.
Imagine that remittances are an economic lifeline to a developing country, and despite this, the volume is so low.
Click here to know what countries pay the most to expatriate workers.
These remittances that you send through a money transfer to Zambia back home undergo several stages of taxation, which, if you have no idea about it, can lead to financial loss due to over-taxation and other associated matters.
Before understanding taxation, let’s first take a look at the Zambian economy.
Let’s now understand taxation, its types, and its classes.
Taxation is a kind of fee governments around the world impose on their citizens. Taxation is applied to all payments, including income, capital gains, sales, inheritance, and corporate property.
Paying taxes is not subject to the consent of the people to whom taxes apply; therefore, governments can resort to the use of force for the implementation of successful taxation.
The core purpose of collecting taxes is that the amount thus collected is spent on the welfare of taxpayers.
It keeps the government machinery oiled and functioning, as a result of which the people enjoy amenities like transportation, law and order, provision of utilities, and a host of departments rendering services in a multitude of areas.
Every government, by and large, applies the following few types of taxes on its people.
Income tax is imposed on the total income of an individual, including salary, wages, etc. In almost all cases, income tax increases with the rise in the taxpayer’s earnings.
People with higher incomes pay more taxes than those with low incomes. It is also called Progressive Taxation.
This type of taxation is imposed on you as a migrant, too, if you earn money and support your family through an online money transfer to Zambia.
Corporate tax is imposed on businesses. This tax is shared between the business, customers, and employees through higher prices of the products or services and low wages.
It is imposed on the income of the employees, and through payroll taxes, social security funds are financed. The payroll amount is deducted from the income and paid to the concerned quarters by the employer.
It is imposed on capital assets like property, investment in stocks, jewelry, bonds, etc. If an asset increases in value, like rising stock prices, this is referred to as capital gain.
So, if you benefit from a capital gain, you will have to pay tax on the profit you have earned.
Property taxes are generally imposed on physical property like land and buildings since these huge taxes are used to finance several government departments.
These are some of the major taxes that you need to know about.
Let’s take a look at the classes of taxes now.
Broadly two classes of taxes are explained below.
Direct taxes are imposed on individuals based on their net wealth, personal net income, or expenditure. Taxes on net worth are based on the asset value minus the taxpayer's total liabilities. Expenditure taxes are imposed on income that is not meant for savings.
These taxes are imposed on import/export transactions and the production and consumption of goods and services. These include value-added taxes, customs taxes on import duties, manufacturing taxes, etc.
If you send money to Zambia online, your remittances will be taxed. Make sure you choose a legal channel that imposes taxes in line with the legal tax regulations where it is applicable, in addition to offering competitive exchange rates and a low fee to compensate for the deducted taxes in the process of transferring remittances.
Zambian immigrants should understand the tax laws and regulations in their host country, including how income, investments, and assets are taxed. It's crucial to be aware of filing deadlines and any tax treaties that may exist between the host country and Zambia.
It depends on your specific circumstances and the tax laws of both countries. Many countries have tax treaties or agreements in place to prevent double taxation. It's advisable to consult a tax professional to determine your filing obligations and explore potential tax benefits.
To maximize deductions and credits, keep detailed records of your income, expenses, and investments. Consult a tax advisor familiar with both Zambian and host country tax laws to identify opportunities for tax savings.
Common mistakes include failing to report all sources of income, missing filing deadlines, and not taking advantage of available tax deductions or credits. Additionally, not seeking professional tax advice can lead to missed opportunities for tax optimization.
Yes, various resources are available, including government tax websites, immigrant support organizations, and tax professionals who specialize in assisting immigrants. These resources can provide guidance, information, and support in navigating taxation as a Zambian immigrant.