Underground Mining Royalties increase by 2%

Zambia will increase underground mining royalties to 8% from 6% as part of an effort to revamp the industry’s tax system, Finance Minister Alexander Chikwanda said in his 2015 budget speech yesterday. The new system he outlined aims to collect revenue from the industry at different stages of the production pipeline by introducing a 30% corporate processing and smelting tax. Another 30% tax will be applied to income earned from “tolling”, industry-speak for an agreement to process another producers raw materials. Open cast mining operations in the southern African nation will now be subjected to a “20% mineral royalty … as a final tax,” Chikwanda said.

The tax system in Africa’s second largest copper producer has been in the spotlight amid a simmering row over VAT refunds. Zambia has been withholding US$ 600m in VAT refunds owed to mining firms after companies failed to produce import certificates from destination countries. The finance ministry has since said it plans to waive the requirement because it is impractical, but no refunds have been made yet.

Chikwanda said the government wanted “an amicable resolution” to the VAT spat.

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