Mineral Royalty is a payment received as consideration for the extraction of minerals.
2. Who is liable for Mineral Royalty?
Holders of the following mining rights are liable to mineral royalty on minerals produced under their respective licenses:
· large scale mining license ,
· large scale gemstone license,
· small-scale mining license,
· small scale gemstone license, and
· artisan’s mining right,
a) Any person without a mining right but in possession of minerals on which mineral royalty has not been paid by the supplier of the minerals.
b) Note that all persons carrying out quarrying of industrial minerals are liable to mineral royalty; this includes the quarrying of gravel, clay and sand.
c) All persons that mine minerals for use as inputs or raw materials in their manufacturing process are also liable to mineral royalty
3. How are minerals classified for tax purposes?
Minerals are classified in five categories as follows:
a) Base metals – means a non - precious metal that is either common or more chemically active, or both common and chemically active and includes iron, copper, nickel, aluminium, lead, zinc, tin, magnesium, cobalt, manganese, titanium, scandium, vanadium and chromium
b) Energy Minerals means a naturally occurring substance in the earth’s crust used as a source of energy and includes coal, uranium and any other minerals used to generate energy but does not include petroleum
c) Gemstones – these are non-metallic substances used in jewellery and they include amethyst, aquamarine, beryl, corundum, diamond, emerald, garnet, ruby, sapphire, topaz, tourmaline and any other non - metallic substance, being a substance used in the manufacture of jewellery that the Minister by statutory instrument declares to be a gemstone.
d) Industrial Minerals – these are rocks or minerals other than gemstones, base metals, energy minerals or precious metals used in their natural state or after physical or chemical transformation and includes but is not limited to barites, dolomite, feldspar, fluorspar, graphite, gypsum, ironstone, when used as a fluxing agent kyanite, limestone, phyllite, magnesite, mica, nitrate, phosphate, pyrophyllite, salt, sands, clay, talc, laterite, gravel and any other mineral classified as an industrial mineral by statutory order
e) Precious Metals – these are not defined in the Act but are high value metals and include gold, platinum, silver, palladium and selenium.
4. How does one compute Mineral Royalty?
Calculation of Mineral Royalty is based on:
a) Gross Value
Gross value is applicable to the following:
- Industrial Minerals
- Energy Minerals
Under this method of calculation, Mineral Royalty is calculated based on the Gross Value of the minerals produced. For purposes of computing Mineral Royalty, ‘gross value’ is defined as “the realizable price for sale Free on Board at the point of export in Zambia or point of delivery within Zambia”
b) Norm Value
Norm Value is used to calculate Mineral Royalty of
- Base metals
- Precious metals
Mineral Royalty is calculated based on the:-
- The monthly average London Metal Exchange cash price per metric ton multiplied by the quantity of the metal or recoverable metal sold
- The monthly average Metal bulletin cash price per metric ton multiplied by the quantity of the metal or recoverable metal sold to the extent that the metal price is not quoted on the London Metal Exchange
- The monthly average of any other exchange market approved by the Commissioner General Cash price per metric ton multiplied by the quantity of the metal or recoverable metal sold to the extent that the metal price is not quoted on the London Metal Exchange or Metal Bulletin.
Note: The Kwacha / US dollar exchange rate used to convert the US dollar norm value into Kwacha norm value is the monthly Bank of Zambia Mid-rate.
For Purposes of calculating the norm value, the metal price and monthly Bank of Zambia mid-rate can be obtained from the Large Taxpayer office or the nearest Domestic Taxes Office.
5. Mineral Royalty Rates
The mineral royalty rates effective 1st January 2015 are as follows:
(a) 6% for underground mining operations as a final tax
(b) 9% for Open Cast mining operations as a final tax
(c) 35% Corporate Income Tax on income earned from tolling.
(d) 35% Corporate Income Tax on income earned from processing mineral ores, concentrates and any other semi – processed minerals.
(e) 9% for minerals in possession
(f) 6% for industrial minerals in possession
(g) 30% corporate income tax on income earned from mining operations
6. Mineral Royalty Returns
Every holder of large-scale mining license, small-scale mining license, gemstone license, or artisan mining right is required to submit a monthly mineral royalty return within fourteen days after the end of the month in which the sale of the minerals is done.
Where the mining license holder has not produced any minerals they are still required to submit a nil return, failure to which estimated assessments will be issued
Failure to submit or late submission of the monthly mineral royalty return attracts penalties as follows:
(a) In the case of an individual - one thousand penalty units (or K300.00) per month or part thereof;
(b) In the case of a company - two thousand penalty units (or K600.00) per month or part thereof.
7. Due Date for Payment
Mineral Royalty is due and payable within fourteen days after the end of the month in which the sale of minerals is done.
Failure or late payment of mineral royalty attracts penalty and interest.
8. Deductibility of Mineral Royalty
Mineral Royalty payable or paid is an admissible deduction in arriving at the gains and profits of a person carrying on mining operations.