Surcharges on mineral production compare very favourably 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.
A royalty is payable calculated at 2% of the market value of minerals f.o.b. less 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 Licence falls below zero.
Exporters of copper and cobalt are levied 35% of taxable income whereas other mineral and ‘non-traditional’ commodities (i.e. 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
Any 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 (including specialized motor vehicles) required for exploration or mining activities.
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.