Tax Implications on the Mining Industry: Zimbabwe Finance Act No. 7 of 2025

The Finance Act No. 7 of 2025 introduces sweeping fiscal reforms targeting Zimbabwe’s mining sector. Most of these amendments are scheduled to take effect on January 1, 2026 (unless otherwise stated). The core legislative theme centers on aggressive domestic resource mobilization, penalizing the export of raw/unprocessed minerals (unbeneficiated exports), and tightening transfer pricing rules to prevent base erosion.

Below is a detailed extraction of the relevant sections and an explanation of their tax implications for mining operators.

1. Expansion and Increase of the Raw Minerals Levy

Sections 10 & 21 (Amending Section 22P of Cap. 23:04 and Section 36P of Cap. 23:06)

The Extraction

The Act amends the levy on the gross value of specific minerals by expanding its scope and tripling the rate:

• Previous Provision: A levy of 1% of the gross value of the sale (within Zimbabwe or on export) of lithium, black granite, quarry stones, and uncut/cut dimensional stones.
• New Provision: The levy is increased to 3% and is expanded to include coal.
• Expanded Scope of Minerals: Coal, lithium, black granite, quarry stones, and uncut and cut dimensional stone (whether polished or unpolished).

Tax and Business Implications

• Direct Cost Increase: Mining operators dealing in these five mineral groups will face an immediate 200% increase in this specific levy (rising from 1% to 3%. This acts as a direct top-line expense on gross sales, regardless of the company’s profitability.
• Coal Sector Impacted: Coal mining companies, previously exempt from this specific levy, are now brought into the net at the high rate of 3% of gross sales.
• Polishing Exemption Removed: Notably, the levy applies to dimensional stones “whether polished or unpolished”, meaning companies that undertook basic polishing to escape the previous levy are still liable for the 3% charge under this section.

2. VAT on Unbeneficiated Mineral Exports

Sections 39, 40, 41, and 42 (Amending Cap. 23:12)

To enforce local beneficiation, the Act imposes punitive Value Added Tax (VAT) rates on raw or semi-processed mineral exports.

A. Lithium (Section 39 amending Section 12B)

• The Extraction:
  • 10% VAT is levied on the export of lithium ore based on the value of “realisable lithium sulphate” therefrom.
  • $10\%$ VAT is levied on the export of lithium concentrate based on the value of “realisable lithium sulphate” therefrom.
  • $0\%$ (Zero-rated) VAT applies to the export of fully beneficiated lithium sulphate.
• Implication: Lithium miners exporting raw ore or standard concentrates (e.g., spodumene/petalite concentrates) will suffer a $10\%$ tax penalty. To achieve the tax-neutral $0\%$ rate, operators must invest in chemical processing plants capable of converting concentrates into lithium sulphate.

B. Platinum (Section 40 amending Section 12D)

• The Extraction: If a platinum supplier has built a plant in Zimbabwe capable of producing platinum group concentrates and is approved by the Minister of Finance (in consultation with the Minister of Mines), a tax rate of 10% on the value of unbeneficiated platinum will apply for a transitional period of twelve months ending on December 31, 2025.
• Implication: This sets up a tight compliance window and penalizes operators who have not progressed their smelting and refining infrastructure.

C. Chrome (Section 42 inserting Section 12I)

• The Extraction: A 10% VAT is introduced on the export of “unbeneficiated chrome” (defined to include chrome ore, fines, crushed/milled/washed ore, and chrome concentrate smelted in pellet or ingot form).
• Valuation Rule: The taxable value will be the higher of:
  1. The market value of ferrochrome on the date of export, referenced to a reputable metals exchange.
  2. The value declared on the customs bill of entry.
• Implication: Because the tax is benchmarked against the higher value of processed ferrochrome rather than raw chrome ore, the effective tax burden on raw chrome exporters will be disproportionately high. This is designed to make raw chrome exports economically unviable, forcing miners to feed local smelters.

D. Antimony (Section 42 inserting Section 12J)

• The Extraction: A 10% VAT is levied on the export of antimony.
• Valuation Rule: Calculated using the higher of the international metals exchange market value or the declared bill of entry value.
• Implication: Expands the export tax net to niche base metals, signaling that the beneficiation policy is being systematically applied across all mineral types.

E. Dimensional Stones (Section 41 amending Section 12E)

• The Extraction: The VAT on exports under this section replaces “uncut dimensional stone” with “cut and polished dimensional stones realised from such exports”.
• Implication: Aligns with the raw materials levy changes, focusing on capturing downstream value in the stone-cutting sector.

3. Tiered Gold Royalty Structure

Section 61 (Amending Chapter VII of the Finance Act [Chapter 23:04])

The Extraction

The royalty rates for gold produced by “other miners” (large-scale/primary producers) are restructured into a tiered, market-sensitive scale based on prevailing international prices at the time of sale:

Gold Price per Ounce (US$)	Royalty Rate
At or below US$1200/oz	3%
Between US$1201 and USD5000 /oz	5%
Above US$5000 / oz	10%

 

Tax and Business Implications

• Windfall Revenue Capture: This structure allows the state to capture higher economic rents in a booming gold market.
• Current Market Reality: With gold prices in 2025/2026 trading well above $1,200 oz but below $5,000 oz, primary gold producers will be locked into a 5% royalty rate.
• Downside Protection: Should the gold market crash below $1,200 oz, miners receive relief as the rate drops to 3%, preserving cash flow during low-margin cycles.

4. Strict Transfer Pricing: Quoted Price Method

Section 31 (Amending Thirty-Fifth Schedule to Cap. 23:06)

The Extraction

The Act mandates the Quoted Price Method for the transfer pricing of all exported minerals.

• Standard: The transaction price must adopt the reference price prevailing in an active international market.
• Approved Reference Benchmarks:
  1. Monthly average London Metal Exchange (LME) cash price.
  2. Monthly average Fastmarkets Metal Bulletin cash price (if not quoted on LME).
  3. Monthly average Shanghai Metals Market cash price (if not quoted on LME or Fastmarkets).
  4. Any other metal exchange cash price approved by the Commissioner.
• Deductions: The reference price can only be adjusted downward for discounts on account of proven low quality, grade, or purity (e.g., average monthly cash price less documented quality discounts).

Tax and Business Implications

• Elimination of “Under-Invoicing”: Mining companies can no longer sell minerals to offshore related-party marketing entities at artificially depressed transfer prices to shift profits to low-tax jurisdictions.
• Audit Risk: ZIMRA will automatically assess corporate income tax and royalties based on these international benchmarks. If a miner sells below the benchmark without clear, documented proof of low quality/grade, ZIMRA will adjust the taxable income upward, leading to steep double-taxation risks and penalties.

5. Currency of Payment Rules

Section 42 (Inserting Section 12K in Cap. 23:12)

The export taxes referred to in sections 12B, 12C, 12D, 12E, 12F, 12I and 12J shall be paid for in United States dollars (or the equivalent
in any other foreign currency at the international cross rate of exchange prevailing on the time of the transfer)

The Extraction

The Act explicitly states that the export taxes on unbeneficiated minerals—specifically under Sections 12B (lithium), 12C, 12D (platinum), 12E (dimensional stone), 12F, 12I (chrome), and 12J (antimony)—must be paid strictly in United States Dollars (or equivalent convertible foreign currency at the international cross rate).

Tax and Business Implications

• Foreign Currency Liquidity: Mining companies cannot utilize local currency (such as ZiG) to settle these punitive export taxes. This places a direct premium on foreign currency cash reserves, which could otherwise be deployed for operational working capital.

6. VAT Registration Incentives for Mega-Beneficiation Projects

Section 46 (Amending Section 23 of Cap. 23:12)

To balance the aggressive penalties on raw exports, the government has introduced a major concession for heavy capital investments.

The Extraction

• New Subsection (1)(c): A mining company approved by the Minister of Finance will qualify for immediate VAT registration at the commencement of any month if it satisfies the Commissioner that its investment in the establishment of a mineral beneficiation plant will exceed $100 million.
• Special Mining Lease (SML) Proviso: Any holder of a Special Mining Lease who commenced development for mining purposes on or after January 1, 2020, is deemed to qualify for VAT registration retrospectively to that date.

Tax and Business Implications

• Cash Flow Relief (Input VAT Claims): Normally, companies in the “pre-production” or construction phase struggle to claim back VAT on capital goods because they do not yet have taxable output. By allowing immediate VAT registration for large beneficiation projects, the Act enables miners to claim back millions in Input VAT on construction, machinery, and setup costs immediately, drastically reducing project capital requirements.

7. Redefining “Mineral” to Exclude Chemically Processed Materials

Section 60 (Amending Section 2 of Cap 21:04 – MMCZ Act)

The Extraction

The definition of “mineral” under the Minerals Marketing Corporation of Zimbabwe (MMCZ) Act is replaced with:

“mineral” means any naturally occurring solid material aggregate, or substance extracted from the earth’s crust via mining or quarrying operations, which has not undergone any chemical transformation, smelting or pyro metallurgical processing.

Tax and Business Implications

• MMCZ Marketing Commission Savings: The MMCZ charges a marketing commission (typically around 0.875% before VAT) on the export of all “minerals.”
• Exclusion of Processed Metals: By explicitly excluding chemically transformed, smelted, or refined metals from the definition of a “mineral,” processed products (like ferrochrome, refined platinum group metals, or lithium sulphate) fall outside the MMCZ’s jurisdiction. This effectively exempts beneficiated products from MMCZ commissions, offering an additional operational cost-saving incentive for local processing.

8. Indigenisation: Quarrying and Granite Mining Reserved

Section 67 (Amending the First Schedule of Cap. 14:33)

The Extraction

The Act adds the following to the Reserved/Threshold Sectors under the Indigenisation and Economic Empowerment Act:

• Item 18: Quarry mining (extraction of rock, stone, sand, gravel, etc., for construction/industrial use).
• Item 20: Granite mining (extraction of granite rock, locating deposits, and removing large blocks/slabs).

Tax and Business Implications

• Ownership Restrictions: Foreign investors looking to enter the granite or quarry stone mining sectors will face strict domestic equity requirements. Non-compliant structures could face licensing issues, which directly impacts their tax status and corporate viability.

Summary of Strategic Guidance for Mining Companies

1. Urgent Feasibility on Beneficiation: The combination of a 3% Raw Minerals Levy, 10% export VAT, and benchmarked transfer pricing makes exporting unprocessed lithium, chrome, and antimony highly tax-inefficient. Feasibility studies for local beneficiation plants (even shared/collaborative plants) must be prioritized.
2. Transfer Pricing Documentation: Companies must build robust transfer pricing files. Sales to trading hubs or foreign parents must strictly align with LME, Fastmarkets, or Shanghai Metals Market pricing, minus verifiable, lab-certified grade discounts to avoid ZIMRA audits.
3. Mega-Project VAT Planning: Operators planning investments over US$100million in beneficiation should immediately apply for Ministerial approval to register for VAT and unlock massive input tax refunds on setup costs.