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Zambian Mining VAT Dispute Escalates

by Mike Godfrey, Tax-News.com, Washington

06 October 2014


Mining giant Glencore has suspended its operations in Zambia ahead of the nation's upcoming budget. The announcement follows complaints from the mining industry about the Government's failure to pay some USD600m in VAT refunds.

The suspension comes amid an industry challenge to Zambian VAT Rule 18, which the Zambia Chamber of Mines (ZCM) has said is causing significant delays to the processing of VAT refunds for exporters or has made claiming refunds impossible.

The rule was introduced in 1997 and was intended to allow exporters to recover input tax on exports. However, mining companies that export their products to the international metal markets must furnish the following documents before VAT is refunded by the Zambia Revenue Authority (ZRA):

  • Copies of export documents for the goods, bearing a certificate of shipment provided by the ZRA;
  • Copies of import documents for the goods, bearing a certificate of importation into the country of destination provided by the customs authority for the country;
  • Tax invoices for the goods exported;
  • Proof of payment by the customer for the goods;
  • Documentary evidence proving that payment for the goods has been made by the customer into the exporter's bank account in Zambia; and
  • Such other documentary evidence "as the authorized officer may reasonably require."

Earlier the Zambia Revenue Authority said that it would remove a requirement that mining companies produce import certificates to receive VAT refunds from September 8, 2014. However, the mining industry is seeking more ambitious reforms of the nation's administrative requirements, alongside the payment of outstanding VAT refunds.

The announcement from Glencore that it has indefinitely suspended its operations in Zambia will place pressure on the Government as it finalizes provisions for the 2015 Budget. Other mining companies, such as Vedanta Resources, has said that Zambia's onerous rules are holding back its investment plans in the nation.

In a statement in September, the ZCM said: "The non-payment of the withheld VAT refunds have had and continue to have a major adverse impact on the operations of the mining companies. Our sincere appeal is that VAT Rule 18 be looked at urgently and resolved and the VAT refunds made to all exporters so that we can continue to progress on the path of increasing mining and manufacturing production to sustain and continue to create jobs. The Zambian Mining Industry will continue to be the engine of the Zambian economy for a long time to come. This industry needs to be nurtured so that we continue to generate revenues required to diverse our economy."

The Government has yet to make an announcement on potential VAT measures that may be included in the Budget, but more comprehensive changes in the area of direct tax are anticipated.

TAGS: compliance | VAT tax authority guidance | tax | investment | value added tax (VAT) | mining | budget | tax authority | manufacturing | Zambia | VAT refunds | VAT compliance matters | Other | Tax

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