KCM given VAT refund lifeline

THE Zambia Revenue Authority (ZRA) has issued a Gazette Notice to effect amendments to Rule 18 of the Value Added Tax Act to provide conditions for zero-rating of exports that usually places the mining companies in an untenable VAT refund position.  

And Konkola Copper Mines (KCM) has said that the decision by Government to revisit the VAT refund rule 18 will see smelter production increase at KCM.

ZRA Commissioner-General Berlin Msiska said yesterday that  Government had been in consultations over the new mineral royalty tax regime, as directed by President Lungu to open negotiations with mining companies to explore  relief entitlements within the provisions of the law.

“Under the Mines and Minerals Development Act, there is a provision for the Mineral Royalty Deferment Scheme. The Commissioner-General may, on application by a holder of a mining right, defer payment of royalty due from the holder upon meeting set conditions. So far, a number of mines have applied for consideration under the Deferment Scheme and Government wishes to advise mining companies to stay within the law,” Mr Msiska said.

This is according to a statement issued by special assistant to the President, Amos Chanda.

And KCM public relations and communication manager Shapi Shachinda said the copper mining giant would expand the use of its smelter after reaching a win-win solution with the Government over future VAT refunds.

“Following dialogue with KCM, the Government has announced that it will resume the refunding of VAT payments made to the Zambian Revenue Authority (ZRA),” said Mr. Shachinda.

He said KCM chief executive officer Steven Din expressed hope and gratitude that the move by Government would help the mine keep its operations.

“We believe this is a very good decision by the Government.  It demonstrates the value of constructive dialogue and consultation. It is an important move to be made at a time when KCM and the industry are experiencing extreme difficult business conditions.”

“The decision comes at a time when copper prices have fallen sharply. Since the start of the year, copper prices have fallen by 15 per cent,” he said.

Mr. Shachinda explained that the company would, in addition to providing improved cashflows at a time of significant business challenges for the company, resume purchasing third-party concentrates for its smelter.

He said during the period when VAT refunds were being withheld, it had become uneconomic for KCM to purchase copper concentrates from other mines in Zambia.

“With issues around repayment resolved, KCM will be able to profitably purchase copper concentrate from neighbouring mines for processing at its smelter. This will expand production and enable increased copper production in Zambia.

“However, we have a number of further challenges that need to be addressed. The issue of the refund of past VAT payment needs to be resolved.

“We hope to see amendments to the new mineral royalties and electricity prices,” Mr Din said.

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