eBusiness Weekly
Business Writer
The Chamber of Mines Zimbabwe (CoMZ) is lobbying Government regarding the newly imposed special capital gains tax whereby the purchaser of a mining title is now required to pay a tax of 20 percent of the value of the transaction.
The new law implemented through Finance Act Number 13 of 2023, and effective from January 1, 2024 entails a 20 percent levy on the sale of the mining title including transactions from the past decade.
A mining title under the special capital gains tax law includes a claim, block of claims, mining lease or special grant and (depending on the context). It also includes any document evidencing a mining right that is precedent to obtaining any of the foregoing titles, such as an exclusive prospecting license or exclusive exploration license. In addition, it can be a share, stake or interest in any mining title.
The CoMZ says its primary concern is to protect companies that previously complied with the law when disposing of mineral rights before the promulgation of the new regulations.
The chamber, a lobby group representing the interests of formal mining firms, expressed optimism that their submissions will be accepted and that the policy will be revisited.
This will help in creating an environment that encourages investment in exploration activities, which they believe is crucial for the long-term growth and development of Zimbabwe’s mining industry.
“The mining industry is hopeful that our submissions will be considered, and the policy can be revisited to promote capital inflows in exploration activities that guarantee sustained development and growth for our mining industry in the medium to long term,” Issac Kwenda, CEO of CoMZ says.
The new taxation is different from regular capital gains tax.
It is based on the value of the entire mining title transaction instead of the capital gain made by the seller of the title. Unlike most capital gain taxes, it is payable by the purchaser not the seller.
It has the characteristics of Value Added Tax (VAT). The new policy significantly increases the tax burden for the purchaser compared to a traditional capital gains tax where the seller pays the tax on profit accrued on the transfer of the mining title.
For example, under a typical 20 percent capital gains tax, if the seller of the mining title sells for US$1 million, having purchased it for US$500 000, the capital gain will be US$500 000. Tax on the capital gain at the rate of 20 percent will be US$100 000.
However, under the new law, the tax will be US$200 000, being 20 percent of the transaction.
