In a recent development, the mines in Africa’s second largest copper producer will now remit taxes over and above mineral royalties in dollars. The Revenue Authority wrote to all mines effective 04 June, to remit all taxes in dollars and directly to the central bank. This is in a move to share up foreign exchange reserves that have plummeted to decade lows.
The correspondence to the mines prescribes that provisional income tax, annual company income tax, domestic and withholding value added tax, withholding tax, customs duty, excise duty and import value added tax will all be remitted in dollars effective 04 June at average central bank rates.
Swift payments will require full disclosure of details in payment instructions. Settlement accounts of the Bank of Zambia held with foreign correspondent banks will be used for receipt of funds.
However VAT refunds will be maintained in Kwacha.
The central bank has implored various interventions to shore foreign exchange reserves to include payment of mineral royalty taxes in dollars in addition to being the only off taker of alluvial gold from the states mining investment vehicle ZCCM-IH. Zambia’s foreign exchange reserves are currently at $1.4bln representing 2.6months of import cover.
The Kwacha Arbitrageur