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Zambia: 2023 National Budget – additional mining tax regime reforms

13 October 2022
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Zambia has set an ambitious goal to increase its annual copper production levels from the current 830 000 to three million metric tonnes over the next 10 years. This is expected to earn Zambia a seat at the table with a few other countries producing more than a million tonnes of copper per annum, including Chile, China, the Democratic Republic of the Congo, Peru and the United States of America.

Effective January 2022, the deductibility of mineral royalties in corporate income tax (CIT) assessments was reintroduced to ensure compliance with international best tax practices and to attract investment in the mining sector.

In the Budget, the Minister proposes to restructure the taxation of mineral royalties by applying mineral royalty tax (MRT) on the incremental value of copper on the basis of a price range proposed (as opposed to the aggregate value). In addition, the Minister proposes to reduce the lowest marginal rate from 5.5% to 4% for a price of below USD 4 000 per tonne of copper. Below is a comparison between the current and proposed MRT regime:

Current Regime Proposed Regime
Price Range Rate (%) Taxable Amount Price Range Rate (%) Taxable Amount
Less than USD 4 500 per tonne 5.5 Full price

amount

Less than USD 4 000 per

tonne

4.0 The first USD 4 000
Between USD 4 500 and USD 5 999 per tonne 6.5 Full price

amount

Between USD 4 001 and USD 5 000 per tonne 6.5 The next USD 1 000
Between USD 6 000 and USD 7 499  per tonne 7.5 Full price

amount

Between USD 5 001 and USD 7 000 per tonne 8.5 The next USD 2 000
Between USD 7 500 and USD 8 999 per tonne 8.5 Full price

amount

USD 7 001 per tonne or more 10 Balance
USD 9 000 per tonne or more 10        

 

The Minister also proposes to replace the current CIT regime with a presumptive tax for artisanal and small-scale mining. The presumptive tax will be based on the gross turnover less mineral royalty payments at the applicable turnover tax rate. This measure is intended to simplify the tax regime for holders of artisanal and small-scale mining licences, which will in turn potentially improve their tax compliance.

To encourage mineral exploration, the Minister proposes the reduction of the rate of property transfer tax (PTT) payable on the transfer of mining rights held by exploration companies from 10% to 7.5%. The objective of this measure is to encourage mineral exploration and the development of new mines, which will in turn increase production and aid the Government’s goal of increasing annual copper production from the current 800 000 metric tonnes to three million metric tonnes.