ZAMBIA Law and Practice Contributed by: Harriet Mdala, Natasha Lungu, Samuel Muleya and Chanda Musonda-Chiluba, MAY & Company
4.3 Transfer Tax and Capital Gains on the Sale of Mining Projects Under the Property Transfer Tax Act (the “PTT Act”), mining rights are explicitly classified as taxable prop - erty. The PTT Act defines property as including mining rights or interests granted under the Mines Act. A mining right and an interest in a mining right can be transferred. A transfer of an interest in a mining right has been interpreted to include an indirect transfer of shares that granted a person beneficial interest in a mining right. In order to transfer a mining right or an interest in a mining right, the holder or the right or interest must obtain the approval of the Minister of Mines and must pay PTT to the Zambia Revenue Authority at the fol - lowing rates: • 10% of the realised value in respect of a mining right for a mining licence; • 8% of the realised value in respect of a mining right for an exploration licence; • 10% of the realised value in respect of a mineral processing licence; and • 8% of the realised value of the interest in a mining licence, which is classified as shares under the PTT Act. The term realised value in respect of a mining right means the actual price of the mining right or, as determined by the tax authority, whichever is higher. In respect of an interest in a mining right, the term realised value is the greater of: • the proportion that the value of the company incorporated in the Republic bears to the value of the company whose shares are being transferred, multiplied by the value of the transferred shares; • the proportion that the value of the company incorporated in the Republic bears to the value of the company whose shares are being transferred, multiplied by the consideration for the transferred shares; or • the proportion that the value of the company incorporated in the Republic bears to the value of the company whose shares are being transferred,
multiplied by the nominal value of the transferred shares. Transfers Through Corporate Structures Outside Zambia The obligation to pay PTT applies irrespective of whether the transfer occurs directly within Zambia or indirectly through corporate structures outside the jurisdiction. In these cases, the transfer is still con - sidered a disposition of property within Zambia if it involves mining rights or an interest in mining (shares), and the tax liability arises as prescribed by the PTT Act. The Supreme Court in the recent case of Teal Min - erals Barbados Incorporated v the Zambia Revenue Authority, Appeal No 4 of 2022 dealt with a transac - tion in which Teal Minerals Barbados (Teal Minerals) entered into a share purchase agreement with EMR for the purchase of Teal Mineral’s shares in Konnoco, which held 80% of the share capital in Lubambe Zam - bia, a mining company in Zambia. The Supreme Court decided that an interest in a mining right may either be direct (for example, legal) or indirect (ie, beneficial). By virtue of Teal Mineral’s shareholding in Konnoco, which in turn held shares in Lubambe Zambia, Teal Minerals held an interest in Lubambe Zambia’s mining rights. Therefore, Teal Minerals transferred its interest in the mining rights held by Lubambe Zambia to EMR. The transaction was therefore subject to PTT. Indirect acquisitions of mining rights through offshore com - panies will therefore also require the approval of the Minister of Mines and the payment of PTT in Zambia. 5. Mining Investment and Finance 5.1 Attracting Investment for Mining Key Features of Attracting Investment in Zambia’s Mining Sector Regulatory and legal framework Zambia’s mining industry is governed by the Minerals Act, which provides a robust legal framework ensur - ing security of tenure, transparent licensing proce - dures, and protection of investors’ rights. Efforts to streamline bureaucratic processes enhance the ease
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