Zambia: Cabinet Slashes Mining Royalties to 9 Percent – by George Mwenya (All Africa.com – April 20, 2015)

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Zambia’s Cabinet today announced new changes to the controversial mining tax, slashing royalties for open cast and underground mining down to 9%.

Under the previous government of President Michael Sata, royalties had been bumped up to 20%, sending chills across the investment community as many multinational mining companies threatened to shut down operations.

Shortly after winning last January’s election however President Edgar Lungu suspended the controversial tax pending the new rules which were proposed today.

The suggestions will still await the approval of parliament with the date off effect set for July, 1st should parliament go ahead with the proposals.

The measures approved by cabinet include the following: Mineral royalty tax rate for open cast mining and underground mining operations will be pegged at 9 percent;

Corporate income tax on income earned from mining operations will be 30 percent;

Corporate income tax on income earned from mineral processing will be 35 percent;

Variable profit tax on income earned from mining operations will be 15 percent when taxable income exceeds 8 percent of the gross sales; and

Deduction of tax losses carried forward to be limited to 50 percent of taxable profits;

Stiffening of penalties for tax offenders; and

Zambia Revenue Authority will introduce stringent enforcement mechanisms to effectively monitor mining activities and ensure greater transparency among mining companies when reporting revenue and expenditure.

According to a press release, “Cabinet has stressed that the approved mining taxation regime will bring about the desired stability, predictability, consistency and transparency in the mining sector.”

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