Introduction to Zambia Banking Regulations
The Bank of Zambia has recently issued new banking regulations in the form of Statutory Instruments 32 and 35 of 2013. The regulations deal mostly with the monitoring of foreign exchange dealings i.e. inflows and outflows in Zambia by the Bank of Zambia.
The regulations will have an impact on certain financial service providers, importers and exporters of goods or services exceeding US$10 000 or the equivalent in foreign currency and any transfer or receipt of money in foreign currency into or out of Zambia exceeding US$5 000 or equivalent in foreign currency.
Under the new regulations affected parties are obligated to comply with the provisions and each transactions requires certain actions from the affected party. Where there is incidence of non-compliance with any regulation, SI 32 and 35 prescribes certain penalties.
Regulations apply to:
- A financial service provider licensed under the Banking and Financial Services Act
- An importer of goods or services exceeding US$10 000 or the equivalent in foreign currency
- An exporter of goods or services exceeding US$10 000 or the equivalent in foreign currency
- A financial service provider designated under the National Payment Systems Act, and
- Any transfer or receipt of money in foreign currency into or out of Zambia exceeding US$5 000 or the equivalent in foreign currency.
Transactions to be monitored
In relation to outflows, the Bank of Zambia shall monitor:
- The value of any imported goods
- The value of any imported services, including management services
- Any amounts remitted out of Zambia, whether unrequited (gratuitous) or otherwise
- The amounts, if any, deposited abroad but generated by a person resident in Zambia from the supply of goods produced or services rendered in Zambia
- Loans granted to non-residents
- Trade credits from non-residents
- Investments made in the form of debt equity and debt securities outside Zambia by persons resident in Zambia.
In relation to inflows, the Bank of Zambia shall monitor:
- The value of goods or services exported out of Zambia
- Profits or dividends received in respect of investments abroad
- Borrowings from non-residents
- Investments in the form of equity from abroad
- Investments in the form of debt securities from abroad, and
- Receipts of both principal and interest on loans to non-residents.
In relation to international transactions, the Bank of Zambia shall monitor:
- The value of imported or exported manufacturing services or goods to or from non-residents
- The net cost effect of telecommunication services
- The value of international transport, courier and postal services
- The value of international accommodation and other hospitality services to or from non-residents, and
- International money transfers into and out of Zambia.
Obligations of affected parties
To comply with the provisions of this statutory instrument, the following are some of the obligations of the affected persons:
- An exporter, importer or foreign investor shall open and maintain a foreign currency denominated account with a financial services provider for the purpose of these regulations
- A foreign investor who acquires incentives under the ZDA Act shall deposit the pledged capital into the account referred to above
- All exports to be declared on the export proceeds monitoring in form 1 set out in the schedule, and the proceeds thereof to be remitted into the foreign currency account within 60 days of export
- Foreign exchange remittances in excess of US$10 000 for account holders and US$5 000 for non account holders, to complete form 2
- Remittances of foreign exchange to be supported with customs clearance for imported goods or evidence of provision of services
- Remittances exceeding US$10 000 to be made via electronic transfer and those exceeding US$100 000 to be made via an irrevocable letter of credit
- All payments of dividends, royalties, management fees, technical fees, commissions, consultancy fees and imports exceeding US$100 000 to be made through a financial institution. Such payments shall be accompanied by prescribed documentation under Section 11 of the Statutory Instrument
- Any acquisition of a foreign exchange loan or letter of credit from a non-resident lender to report the borrowing to the Bank of Zambia with supporting documentation prescribed under Section 12 of the Statutory Instrument. Private external debt contracted before the effective date of this Statutory Instrument to be registered.
- No over-the-counter withdrawals in excess of US$5 000 for account holders and in excess US$1 000 for non account holders, for financial service providers, and
- Foreign exchange bureaus or money remittance service providers shall perform limited transactions to the value of US$1000 per person, per day, and shall not exceed US$5 000 per person, per month.
Penalties for contravention of SI 32 and 35
- A fine not exceeding 100 000 penalty units or imprisonment not exceeding 10 years
- For a body corporate or unincorporated body, every director or manager shall be liable to the penalties under the Statutory Instrument.
Note that the prescribed forms are in the appendix of the Statutory Instrument.
How can we help you?
- Advise you on the impact of SI 32 and 35 on your business
- Review loan and management services and other agreements for compliance with the tax laws, amongst other regulations
- Facilitate the obtaining of tax clearance certificates and other proof of tax payments as required by SI 32, and
- Provide audit assurance services as required under SI 32 and 35.
+260 211 372 900
Head of Tax
+260 211 372 900
Head of Advisory
+260 211 372 900
+260 211 372 900
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About David Okwara
Bank of Zambia, Banking and Financial Services Act, banking regulations, compliance, debt securities, deposit, dividends, equity, exporters, financial service providers, financial services, foreign currency, goods and services, imported goods, imported services, importers, imports and exports, inflows, international money transfers, investments, KPMG Africa, loans, loans to non-residents, manufactured goods, manufacturing services, monitoring foreign exchange, National Payment Systems Act, new banking regulations, non-resident, outflows, profits, provisions, regulations, SI 32, SI 35, trade credits, transactions, value, Zambia, ZDA act