ZAMBIA Law and Practice Contributed by: Harriet Mdala, Natasha Lungu, Samuel Muleya and Chanda Musonda-Chiluba, MAY and Company
While IPPAs are not explicitly termed as “stabi - lisation agreements”, they can encompass pro - visions traditionally found in such agreements, such as: • tax stability; • protection against expropriation; and • legislative and regulatory stability. 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 property. 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 inter - est must obtain the approval of the Minister of Mines and must pay PTT to the Zambia Revenue Authority at the following rates: • 10% of the realised value in respect of a min - ing right for a mining licence; • 8% of the realised value in respect of a min - ing right for an exploration licence; • 10% of the realised value in respect of a min - eral 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 struc - tures outside the jurisdiction. In these cases, the transfer is still considered a disposition of property within Zambia if it involves mining rights or interest in mining (shares), and the tax liability arises as prescribed by the PTT Act. The Supreme Court in the recent case of Teal Minerals Barbados Incorporated v the Zambia Revenue Authority, Appeal No 4 of 2022 dealt with a transaction in which Teal Minerals Barba - dos (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 Zambia, a min - ing company in Zambia. The Supreme Court decided that an interest in a mining right may either be direct ie, legal or indirect ie, beneficial.
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