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Zambia: Deductibility of the mineral royalty re-introduced for corporate income tax assessment purposes

11 November 2021
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The Minister of Finance and National Planning has proposed to re-introduce the deductibility of the mineral royalty for CIT assessment purposes, beginning January 2022.

The proposal, which will ensure compliance and uniformity with international best tax practices, settles what has been the mining companies and stakeholder’s call, over the last three years, to treat mineral royalty payments as a deductible expense to avoid double taxation and attract investment in the sector.

The proposal is anchored on the Government’s desire to benefit from the expected copper boom, as well as to ramp up production.

In particular, the Government is looking at facilitating the increase in copper output from the current 800 000 to over three million metric tonnes over the next 10 years and promoting further exploration and value addition to spur job creation, investment, foreign exchange and economic development.

Stakeholders in the sector have observed that the non-deductibility of mineral royalty tax encouraged tax avoidance and negatively impacted the sector, particularly, the mining companies’ ability to see Zambia as a prospect for investment or expansion of existing projects in the case of existing companies.

Other tax measures relating to the mining sector include the extension of property transfer tax (PPT) on transfers of mineral processing and other mining-related licences.

At present, only a transfer of a mining right is subject to PTT while the transfer of a mineral processing licence is not. This measure aims to subject transfers of mineral processing licences to PTT as they have intrinsic value akin to mining rights.

In terms of the MRT rates, the Minister has maintained the MRT rates based on a sliding scale and has intimated plans to review the rates in future as part of the Government’s broader mining tax policy framework.

Elsewhere, the Minister revealed that the Government is currently undertaking a comprehensive audit of the mining licences issued, to develop and implement reforms that will increase local participation in the mining sector.