The Finance (No. 2) Act, 2024, ushers in sweeping reforms to Zimbabwe’s mining tax framework, aiming to boost revenue collection, improve tax compliance, and enhance the transparency of the sector. Key changes include the introduction of a 2% levy on lithium and granite exports. Additionally, the Act stipulates that mining entities must be registered taxpayers with the Zimbabwe Revenue Authority (ZIMRA) before acquiring or transferring any mining titles. To further regulate the sector, a mining royalties tax is now applicable, with rates determined by the Thirty-Seventh Schedule. Special provisions are also made for capital gains tax, particularly targeting the sale or transfer of mining assets. Furthermore, the definitions of beneficial owners and controllers have been broadened, tightening due diligence and ensuring that entities exerting significant control over mining operations are held accountable.
1. Mining Royalties (Section 22Q)
(a) Subsoil Resources: Confirms that ownership of subsoil resources (e.g., minerals) lies with the President by right of prerogative.
(b) Royalty Calculation: The royalties chargeable under section 36Q of the Taxes Act will be determined according to the provisions in Chapter VII of the Taxes Act.
2. Levy on Lithium, Black Granite, and Dimensional Stones (Section 22P)
(a) 2% Levy: A 2% levy is now chargeable on the gross value of sales (both within Zimbabwe and for export) of lithium, black granite, quarry stones, and both cut and uncut dimensional stones.
(b) Currency of Trade: The levy must be paid in the currency of trade, aligning with Zimbabwe’s policy of foreign currency payments for certain sectors
3. Registration of Mining Entities and Acquisition of Mining Titles (Section 98D):
(a) Mandatory Registration for Mining Entities: From 1st January 2025, mining entities (whether local or foreign) will not be able to acquire or transfer mining titles unless they are registered taxpayers with the Zimbabwe Revenue Authority (ZIMRA). This ensures that mining entities are in compliance with tax obligations before being granted or transferring mining rights.
(b) Mining Title Definition: The definition of “mining title” includes mining claims, leases, and special grants as well as any share, stake, or interest in a mining title.
(c) Certificate Requirement for Mining Title Registration: When acquiring or transferring a mining title, the mining entity must submit a tax registration certificate issued by ZIMRA. If this certificate is not provided, the transaction will be deemed void and can be cancelled at the request of the Commissioner-General.
4. Definition of “Beneficial Owner” and “Controller”:
(a) Clarification on Ownership and Control: The Act expands the definitions of beneficial owner and controller to include entities or individuals who exercise significant control over a mining entity, either directly or indirectly. A controller is defined as a person who, despite formal structures, has significant influence over the affairs of the entity, such as through a substantial stake or decision-making power.
(b) This ensures that not just the formal titleholder but also those with real control or beneficial interest in a mining operation are captured under the tax and regulatory framework.
5. Amendments to the Income Tax Act [23:04]: Inclusion of Mining Royalties (Section 36Q and Thirty-Seventh Schedule):
(a) New Section 36Q – The Income Tax Act is amended by the insertion of a new section 36Q which provides for the charging, levying and collection of mining royalties throughout Zimbabwe and the Thirty-Seventh Schedule outlines how these royalties will be assessed and collected. The inclusion of mining royalties under the Act means that mining companies must account for this additional tax in their financial operations.
(b) New Thirty-Seventh Schedule – This schedule provides a framework for calculating, declaring, and paying mining royalties in Zimbabwe, detailing responsibilities, rates, and penalties. Key provisions include:
5.1 Definitions
Liable Person:
– Miners required to submit royalty returns.
– Fidelity Gold Refinery (Private) Limited when withholding royalties.
– Mineral: As defined in Section 36(f) of the Finance Act [Chapter 23:04].
5.2 Royalty Calculation
Criteria for Different Minerals:
(a) Platinum Group Metals:
Based on the London Metal Exchange price:
– 85% for concentrate.
– 90% for matte.
(b) Gold: Gross fair market value set by Fidelity Gold Refinery.
(c) Diamonds and Other Minerals: Value determined by contracts with the Minerals Marketing Corporation of Zimbabwe.
Gross value excludes costs like beneficiation or processing.
5.3 Declaration and Payment
Submission Deadlines:
(a) Returns must be submitted by the 10th day of the month following the disposal of minerals.
(b) Returns are treated as self-assessments for royalties due.
5.4 Commissioner’s Role:
Can extend deadlines or raise additional assessments if returns are incomplete or inaccurate.
5.5 Penalties for Non-Compliance
Default Penalties:
(a) Double the royalties or a fine for missing deadlines.
(b) Additional royalties for omissions, incorrect statements, or undisclosed facts.
Remission:
(a) Penalties may be waived if non-compliance was not intentional.
5.6 Royalty Collection
Deduction at Source:
Agents like financial institutions or authorized entities must deduct royalties for certain minerals.
Payment Breakdown:
For gold, diamonds, platinum, and similar minerals:
– 50% in-kind (physical mineral).
– 10% in foreign currency.
– 40% in local currency.
For other minerals:
– 50% in foreign currency, 50% in local currency.
5.7 Late Payment Penalties:
(a) Interest accrues on unpaid royalties.
(b) Persistent non-compliance results in fines or imprisonment.
Commissioner’s Powers
(a) May estimate royalties if returns are missing or unsatisfactory.
(b) Can recover unpaid royalties and penalties as civil debts
6. Amendment of the Capital Gains Tax Act [Chapter 23:01]
Amendment to Section 30B of the Capital Gains Tax Act [Chapter 23:01]
(a) The Capital Gains Tax Act [Chapter 23:01] is amended in section 30B, titled “Special capital gains tax on entities acquiring mining title or any interest therein,” through the repeal of subsection (3) and its replacement with the following provision:
(b) “(3) A special capital gains tax shall be levied and charged on the transfer of a mining title, being a tax on the value of any transaction concluded within or outside Zimbabwe, whereby any mining title has been transferred to an entity, provided that such transfer occurs on or after the 31st December, 2023.”
(c) This amendment clarifies the applicability of the special capital gains tax to all transactions involving the transfer of mining titles, irrespective of the jurisdiction in which such transactions are executed, provided the transfer occurs after the stipulated date.
7. Amendment of the Finance Act [Chapter 23:04]
(a) Section 36 of the Finance Act [Chapter 23:04] is amended by the addition of paragraph (f) after paragraph (e).
(b) The amendment expands the definition of “mineral” to include mineral ore and mineral-bearing products. It also grants the Minister, in consultation with the Minister of Mining, the authority to classify additional naturally occurring substances as minerals through statutory instruments. This ensures flexibility in addressing emerging resources or substances of economic value.
(c) Sections 37A and 37B of the Finance Act are repealed.
(d) The Schedule to Chapter VII of the Finance Act [Chapter 23:04] is amended, with effect from the 1st of January, 2025, in the section prescribing the rates of royalties for the purposes of section 245 of the Mines and Minerals Act [Chapter 21:05], by the deletion of the items referring to “Coal” and “Black granite and other cut or uncut dimensional stone” and the substitution thereof with the following items:
– All types of coal . . . . . . . . . . . . . . 2
– Black granite . . . . . . . . . . . . . . . 2
– Other cut or uncut dimensional stone . . . . . . . . 2
– Quarry stones . . . . . . . . . . . . . . . 2
(e) This amendment establishes a uniform royalty rate of 2% for the specified minerals and mineral products
8. Amendment of the Gold Trade Act [Chapter 21:03]
(a) The Gold Trade Act [Chapter 21:03] is amended by the insertion of Part IIIA after Part III, establishing provisions related to the National Gold Refinery and Gold Trade Enforcement. Key provisions include:
(b) Interpretation: Definitions for terms such as “full receipt” and “national gold refinery” are introduced, with the latter referring to Fidelity Gold Refinery or any other entity designated by the Minister for Finance after consultation with the President.
(c) Gold Trade Enforcement Unit: A unit under the national gold refinery is established, responsible for preventing gold theft, ensuring gold sales are made only to authorized dealers, and preventing smuggling. It comprises staff from the national gold refinery and the Zimbabwe Republic Police, certified as gold trade enforcement officers.
(d) Powers of the Unit: Enforcement officers are granted broad powers to enter registered mining locations, inspect operations, seize gold, and examine related records and equipment. They can act with or without warrants depending on the situation, such as when investigating illegal gold trade or detecting smuggling.
(e) The head of the Gold Trade Enforcement Unit has the authority to issue written directions to miners or individuals with business premises where gold is lawfully possessed. These directions aim to improve security and prevent the theft of gold from mining locations or business premises. A person who willfully contravenes these directions is committing an offense of obstruction, as defined in section 22D(1)(a) of the Act.
(f) Obstruction: Obstructing or tampering with enforcement officers is punishable by fines or imprisonment.
(g) Seizure and Forfeiture: Gold and related equipment may be seized if they are connected to offenses under the Act, pending prosecution. Seized items are to be properly documented with receipts provided to the owner or relevant parties.
(h) This new part enhances the framework for controlling and regulating the gold trade in Zimbabwe, with a specific focus on enforcing compliance and preventing illegal activities.
The Finance (No. 2) Act, 2024, represents a significant overhaul of Zimbabwe’s mining tax system, introducing a 2% levy on lithium and granite exports, imposing a mining royalties’ tax, and refining capital gains tax provisions for mining assets. These reforms will result in an increased compliance and due diligence among mining firms and investors.
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