Library of Congress

Law Library of Congress

The Library of Congress > Law Library > News & Events > Global Legal Monitor

Zambia: Mines and Minerals Bill and Related Income Tax Amendment Bill Tabled in Parliament

(July 8, 2015) On June 25, 2015, Zambia’s Minister of Mines, Energy and Water Development submitted the Mines and Minerals Development Bill, 2015 to the National Assembly (parliament) for a first reading. (Pamela Chitulang’oma, Zambia: Mines and Minerals Development Bill Presented to Parliament, TAX NEWS SERVICE (June 30, 2015), International Bureau of Fiscal Documentation online subscription database.) The objectives of the legislation are reportedly to:

  • revise the law relating to the exploration, mining and processing of minerals;
  • provide for safety, health and environmental protection in mining operations;
  • provide for the establishment of the Mining Appeals Tribunal;
  • reduce the mineral royalty rate for underground mining operations from 8% to 6%; reduce the mineral royalty rate for open cast mining operations from 20% to 9%; and
  • repeal and replace the Mines and Minerals Development Act, 2008. (Id.)

At the same time, the Zambian Cabinet has approved and submitted to the National Assembly legislation to implement proposed changes to the country’s mining tax structure. The draft law seeks to:

  • increase the corporate income tax on mining operations from 0% to 30% (where the income from the operation does not exceed 8% of gross sales, with a certain formula to be applied if the income does exceed 8%);
  • introduce a maximum 15% variable profit tax on mining operations;
  • increase the corporate income tax on mineral processing from 30% to 35%; and
  • further limit the deduction of mining operations’ losses to 50% of taxable profit for each charge year. (Cabinet Approves Bill to Increase Corporate Income Tax for Mining Operations by 30%, OPEN ZAMBIA (June 16, 2015); The Income Tax (Amendment) Bill, 2015, N.A.B. 7, 2015 (June 17, 2015).)

While the corporate income tax is levied at different rates for different levels of profit of a firm, “[v]ariable profit tax is applied when corporate expense varies with production output. Variable costs are those that vary depending on a company’s production volume; they rise as production increases and fall as production decreases.” (Cabinet Approves Bill to Increase Corporate Income Tax for Mining Operations by 30%, supra.)

In addition, the government has determined that the mineral royalty tax will be 9% for open-cast mining operations and 6% for underground mining operations. (Id.) The underground mining royalty rate had recently been revised upward to 9%, leading to a standoff between the government and mining companies that had adversely affected copper output and profits in particular. The return to the lower rate is viewed as a windfall for foreign-invested mining companies. (Cecilia Jamasmie, Zambia to Slash Royalties, Reinstate Mining Tax, MINING.COM (June 24, 2015).)

Zambian authorities had done away with corporate income taxes in October 2014 while continuing to have open-pit mining companies pay up to 20% of revenue in royalties, versus a previous 6%, and increasing the royalty rate of underground mining operations from 6% to 8%. (Id.) Aside from the open-pit mining royalty rate of 9% and the underground mining rate of 6% being more acceptable than the 20% rate and 8% rates, respectively, the reversion to the corporate tax is reportedly more welcome to the mining companies because many of them are able to elude it by claiming they are not profitable. (Alexandra Wexler, Zambia to Roll Back Copper Mining Taxes, WALL STREET JOURNAL (updated June 24, 2015).)

In a related development, acting chief government spokesperson Ngosa Simbyakula stated that the Cabinet had approved the Gold Trade (Repeal) Bill, which would repeal the Gold Trade Act, in order to avoid unnecessary duplication, because the gold trade would be covered under the revised Mines and Minerals Development Act. (Cabinet Approves Bill to Increase Corporate Income Tax for Mining Operations by 30%, supra.)