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Tax Regime & Incentives
Surcharges
on mineral production compare very favorable with most countries in
terms of royalties and taxes, and a number of financial incentives have
been created specifically to encourage investment in the mining
industry.
Royalties
A royalty is payable calculated as 2% of the market value of minerals
f.o.b. less the the cost of smelting, refining and insurance, handling
and transport from the mining area to the point of export or delivery
within Zambia. Royalty payments may be deferred if the cash operating margin of a holder of a Large Scale Mining
License falls below zero.
Corporate
Tax
Exporters of copper and
cobalt are levied 35% of taxable income whereas other mineral and
"non-traditional" commodities (ie. excluding copper and
cobalt) attract a levy of 15%. Companies listed on the Lusaka Stock
Exchange are levied at 30% of taxable income.
Relief
from Income Tax
Ant investment
in mining, including prospecting, attracts deductions from income tax on
the following expenditures:
- capital expenditure; allowances of
25% on plant, machinery and commercial vehicles; 20% on
non-commercial vehicles; 5% on industrial buildings.
- prospecting expenditure under special
circumstances.
- mining expenditure under special
circumstances
- mining expenditure on a non-producing
mine
- mining expenses incurred by a mine of
irregular production close to the end of its life.
Relief from other Surcharges
A holder of a mining right is exempt from
customs, excise and Vat duties in respect of all machinery and equipment
required for exploration or mining activities
Remission
There are no restrictions in respect of
the amount of profits, dividends, or royalties that may be
externalized, although a withholding tax of 15% is levied.
In general, the Zambian tax regime
also provides the following terms.
- 100% deduction of pre-production expenses and other capital expenditures
as defined in the Income Tax Act.
- Accelerated depreciation allowances for expenditure on machinery and
equipment which does not qualify for the 100% deduction.
Unlimited carry forward of losses.
- Import duties are charged on specific items and the duty varies between
20-40%. But items such as beers, wines, cigarettes, jewellery, cosmetics
and luxury capital goods may be charged at higher rates. Certain
essential goods such as crude oil, medical supplies and fertilisers are
exempt from import duty.
- Pay-as-you-earn system of tax collection applies to personal emoluments.
Individuals ordinary resident in Zambia are liable to tax on income flow
sources in Zambia.
Other taxes include the following:
Non-resident withholding taxes, all charged at 10% include; rents,
contractors, dividends, interest, management fees and royalties.
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