Mining companies extracting minerals are subject to various taxes and levies. These taxes constitute the country’s mining fiscal regime.The following taxes and levies are charged on mining operations:

MINERAL ROYALTIES

A royalty is a usage based tax which is calculated as a percentage of the gross fair market value of minerals produced and not quantity. Royalties are levied in terms of section 244 of the Mines and Minerals Act[Chapter21:05], whilst the royalty rates are fixed through the Finance Act.The Mines and Minerals Act provides for a full rebate of royalty in respect of all minerals or mineral-bearing products used wholly within Zimbabwe. In Zimbabwe royalties are charged depending on the mineral as follows:

Mineral

Royalty (% of Gross Mineral Value)

Diamonds

15

Other precious stones

10

Platinum         

10

Gold(>0.5kgs)

Small Scale Miners(<0.5kgs)

5

1

Other Precious Metals

4

Base Metals

2

Industrial Metals

2

Coalbed Methane

2

Coal

1

 

CORPORATE INCOME TAX

Income Tax is charged in accordance with the Income Tax Act (Chapter 23:06), Section 15(2)f. Income tax on mining operations is levied at 15% for Special Mining Lease Holders and 25% for other mining title holders.

 

ADDITIONAL PROFIT TAX (APT)

Additional profits are profits that are gained by holders of Special Mining Leases as stated in the Income Tax Act. This tax is over and above the normal income tax is payable upon attaining a formula based on the level of profitability. The tax is compensation for the generous fiscal incentives granted exclusively to holders of a Special Mining Lease.

WITHHOLDING TAX

Subject to certain exemptions, mining companies are subject to the following withholding taxes levied in terms of the Income Tax Act:-

  • Withholding tax on fees for services of a technical, managerial, administrative or consultative nature paid to a non-resident  at a rate of 15%;
  • Withholding tax on remittances at a rate of 15%;
  • Withholding tax on dividends at a rate of between 10% and 15% depending on whether the company paying out the dividend is listed on the Zimbabwe Stock Exchange or not.

 

DEDUCTIBLE EXPENDITURE

The Income Tax Act specifically provides for the deductibility of expenditure and losses which are incurred for the purposes of trade or in the production of the income.

1. Capital Allowances.

Mining exploration and development expenditure incurred before commencement of production is deductible in full in the first year of production against income derived from the mining activities.Subsequent development expenditure is written off in the year expended.

 

2. Assessed Losses

There is no restriction on carryover of tax losses; these can be carried forward for an indefinite period.These tax deductible expenditures are over and above the other deductible expenditure such as administration costs.

PAY AS YOU EARN (PAYE)

The Pay As You Earn (PAYE) system is a method of paying Income Tax on remuneration. The mining company deducts tax from salaries or pension earnings of its employees before paying the net salary or pension. The official tax table operates on an escalating scale basis, (i.e. the higher the earnings, the greater percentage tax charged on each bracket of earnings). When earnings of the employee reach a certain amount, the percentage stops increasing and a flat rate of tax becomes applicable for any earnings above this level - that is Marginal Tax Rate (MTR).

PRESUMPTIVE TAX

This tax is charged on the basis of presumed income by small scale miners. However, this tax was removed to incentivise small scale miners.