03/07/2025
TAX HOLIDAYS: FACT OR FACEBOOK MYTH
A Reality Check on Zambia’s Mining Taxes.
1. Walking Through the Smoke and Mirrors
Social media never sleeps. Day in, day out, you hear the cries:
"Mines don’t pay tax!"
"Foreigners are stealing our copper!"
"Tax holidays are killing us!"
It’s easy to get swept into outrage when we feel we’re not getting our fair share. But before we break out the drums and march on Kalumbila, let’s pause, breathe, and look at the real tax story—the one that doesn’t go viral but pays the bills.
2. What Taxes Do Mines Actually Pay?
Contrary to the popular belief that mines operate tax-free, they pay a range of taxes—some of which are specific to the mining sector and quite aggressive.
Corporate Income Tax (CIT): This is charged on the profit a company makes after deducting costs. For mining companies, the current rate is 30% (ZRA, 2024).
Mineral Royalty Tax (MRT): This is charged before profits are even considered. Mines pay based on the gross value of minerals at the point of sale, regardless of whether the mine is making a profit or not. For copper:
4% if the international price is less than $4,000 per tonne,
6.5% for $4,000–$4,999,
8.5% for $5,000–$6,999,
10% if the price is above $7,000 (Ministry of Finance, 2023 Budget Speech).
Withholding Taxes: These apply to management fees, interest, royalties, and dividends sent abroad. The standard rate is 15%, unless reduced by a double taxation treaty (ZRA, 2024).
Export Duties: For example, there’s a 10% duty on copper and cobalt concentrates, and from 2025, Zambia introduced a 15% export tax on emeralds (Zambia Revenue Authority, 2025).
Property Transfer Tax: When a mine or mineral right changes hands, the buyer pays 10% on the transaction value.
Other Taxes: These include Pay-As-You-Earn (PAYE) for employees, NAPSA, Skills Development Levy, environmental fees, and local government rates—just like any other business.
So, no—mines are not on a permanent holiday.
3. Royalty Tax: The One That Never Waits
What makes Mineral Royalty particularly heavy is that it’s not profit-based. Even if the mine is operating at a loss—due to high energy costs, equipment breakdowns, or global copper price crashes—they still pay the royalty. It’s like paying rent for your shop even if no customer walks in.
This royalty was once non-deductible, meaning mines were taxed again on money they had already paid out. But since 2022, Zambia aligned with international best practice and allowed it to be deducted before calculating profit tax (GRZ, 2022 Budget).
4. Tax Holidays: Fact or Facebook Myth?
Now to the hot topic—tax holidays.
Yes, they exist, but they are not what many think. Zambia, like many countries, offers time-bound tax incentives under the Zambia Development Agency (ZDA) Act to attract investment, especially in high-risk sectors like mining.
Here’s how it works for qualifying investments:
0% corporate tax for the first 5 years if set up in a Multi-Facility Economic Zone (MFEZ).
From year 6 to 8: 50% tax rate.
From year 9 to 10: 75% rate.
Full 30% rate from year 11 onward (ZDA Act, 2023).
No import duty on capital equipment like excavators, drill rigs, etc.
Losses can be carried forward up to 10 years, which is reasonable given how expensive and slow mining exploration is.
These are not “free passes.” They are strategic levers to attract billion-dollar investments into a country still developing basic infrastructure.
5. VAT Refunds: The Most Misunderstood Issue
The other issue that causes alarm is VAT. Many say, “Mines are refunded more than they pay!”
But VAT is not meant to be revenue for government. It’s a pass-through tax. Mines buy fuel, chemicals, transport, and services—paying VAT upfront. Since most of their output is exported and zero-rated, they then claim refunds for what they paid. It’s standard practice worldwide.
In April 2024 alone, ZRA refunded about K1.2 billion in VAT to mines. While it looks bad on paper, it’s simply money that was never government’s to keep (ZRA Monthly Report, April 2024).
6. Do Mines Leave Anything on the Table? Yes—A Lot
Let’s take a few real-life examples:
Kagem Emerald Mine (Gemfields) declared that 31% of its total revenue went to government in the form of taxes, royalties, and dividends in 2023 (Gemfields, 2023 Annual Report).
Kansanshi, Lumwana, and Mopani have consistently ranked among ZRA’s top five taxpayers (ZRA Annual Reports, 2022–2024).
Besides that, the mining sector employs over 50,000 direct workers and tens of thousands more indirectly in logistics, catering, security, etc. They build roads, clinics, and schools in host communities—some of which are better than GRZ’s own.
7. Let’s Be Real—And Let’s Be Fair
We must ask honest questions:
Are we collecting fairly?
Are we investing what we collect wisely?
Are we diversifying beyond copper?
But let’s not throw wild accusations that scare away investment, especially when we need the sector to grow, produce more, and bring in forex to pay for fuel, medicines, and roads.
We can’t industrialise by bashing the sector that funds the budget. Instead, let’s focus on:
Improving transparency (like through Zambia’s EITI membership),
Demanding value addition (like local smelting), and
Using revenues to build new sectors like agriculture, tech, and tourism.
8. A Patriotic Appeal
Fellow citizens, let’s speak with facts, not fury. Emotions may start the fire, but only knowledge will keep the lights on—literally.
The mines are not saints. But neither are they ghosts stealing copper in the night. They are players in our economy—and like any player, they play by the rules we set.
So, if we want more, let’s write better rules, not louder Facebook posts.
_______
Zambian Angle
Sources Cited:
1. Zambia Revenue Authority (2024). Tax Guide for Mining Sector
2. Ministry of Finance (2023). Budget Address to Parliament
3. Zambia Development Agency Act (Amended 2023)
4. Gemfields Group Ltd (2023). Annual Financial Report
5. Zambia Extractive Industries Transparency Initiative (ZEITI Reports 2021–2023)
6. ZRA Monthly Tax Collection Reports (April 2024)
7. GRZ (2022). Finance Act Amendments on Mineral Royalty
