Zambia Revenue Authority

Transcription

1 Zambia Revenue Authority 2015 MINING TAX REGIME - ZAMBIA PETER PHIRI DIRECTOR LARGE TAXPAYER OFFICE

2 Overview of Presentation Outline of Presentation Over view of 2014 mining tax regime An overview of the 2015 mining tax regime (January to June); Outline of some of the advantages and challenges of 2015 the regime; Expected new tax changes (effective July 2015) Capacity Building Initiatives

3 Mining Regime Prior to 2015 Mining Operations businesses carrying on mining or both mining and mineral processing. Exclusive mineral processing taxed as manufacturing income. (outside mining regime, CIT at 35%)

4 Mining Regime Prior to 2015 Corporate income tax based on a variable tax rate (Y = 30%+[a-(ab/c)]). 10-year tax loss carry forward period. Ring fencing of expenditure for none existing mines. Capital expenditure deduction at 25%

5 Mining Regime Prior to 2015 Hedging income treated as arising from a separate source Mineral royalty treated as a deductible expense for Income Tax purposes Mineral Royalty charged at 6% rate Mineral Royalty tax base Norm or Gross Value depending on mineral

6 2015 Mining Tax Regime January to June 2015 Corporate Income Tax Rate at zero per cent except for industrial minerals Income from mineral processing taxed at 30%. 20% on Open cast operations 8% on under ground operations

7 2015 Mining Tax Regime January to June 2015 Mining operations re-defined income from third party purchases and tolling excluded & taxed as income from mineral processing. Introduction of a definition for mineral processing.

8 2015 Mining Tax Regime January to June 2015 Corporate Income Tax Rates - on income from mineral processing at 30%. from mining operations at zero % from mining operations relating to industrial minerals at (Y = 30%+[a-(ab/c)]).

9 2015 Mining Tax Regime January to June 2015 Mineral Royalty rate based on type of mining operation 20% for open cast operations 8% for under ground operations 6% on industrial minerals Opencast operations include winnings from leaching, tailing dumps or any similar dumps.

10 2015 Mining Tax Regime Advantages & Challenges The regime was premised to provide the following advantages - Avoid the complexity of dealing with transfer pricing and other tax planning transactions. Administrative efforts targeted at a simplified regime (one tier regime). Generation of increased revenues than the twotier system.

11 2015 Mining Tax Regime Advantages & Challenges The regime was premised to provide the following advantages - All mining companies contribute a significant level of revenue, unlike previously were most mining companies were not contributing corporate taxes because of accumulated tax losses. Ease revenue forecasting for Government.

12 2015 Mining Tax Regime Advantages & Challenges Challenges posed by the regime- Ascertaining correct production quantity arising from open pit and underground mines as well as leaching processes where companies have all type of operations for mineral royalty purposes. Indifferent to individual mine operational costs Cash flow challenges for the mines

13 2015 Mining Tax Regime Advantages & Challenges Challenges posed by the regime- Determining appropriate basis of apportioning income arising from mineral processing and mining operations for CIT purposes. Determining appropriate cost apportionment basis for capital allowance purposes in relation to assets that have dual use (e.g smelter, refinery, buildings)

14 Expected New Mining Tax Regime July 2015 Government expected to introduce the following new proposals Income from Mineral processing to be taxes at 35%. Revert to taxing income from mining operations at a variable tax rate (Y = 30%+[a- (ab/c)]). Limit deduction of losses brought forward to fifty percent of taxable income.

15 Expected New Mining Tax Regime July 2015 Government expected to introduce the following new proposals Reduce the mineral royalty rate for open pit mining from 20% to 9% Reduce the mineral royalty rate for underground mining from 8% to 6% Strengthen penalization of offences.

16 Capacity Building Initiatives Mining Unit Deals with all the tax affairs for all mining companies Trained personnel in the unit Includes staff with mining qualifications mining engineers and metallurgists

17 Capacity Building Initiatives Mineral Value Chain Project Reporting and monitoring of the mining value chain Setting up of laboratories for mineral analysis Use of weigh bridges for mineral quantity verifications Automation of export permits issuance

18 Capacity Building Initiatives NORWEGIAN TAX AUTHORITY Capacity building for taxation of large taxpayers. Audit support Data analysis skills support Provision of auditing tools

19 Capacity Building Initiatives OECD Capacity building in taxation of international transactions Review and advise on transfer pricing audits Workshop international mining expert Review of Transfer Pricing legislation

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