M a r k e t N e w s

Tanzania seals new tax deal with mining firms

Posted on : Saturday, 17th January 2015

 The Tanzanian government has signed an agreement with mining companies operating in the country.The agreement sets new terms for royalty payments, scrapping the 15 per cent value-added tax (VAT) relief and increasing the fees companies pay for services they get in the mining areas.

AngloGold Ashanti and Geita Gold Mine were the first companies to sign the deal that replaces the Mining Development Agreement (MDA). Company executives Michael Van Anen of AngloGold Ashanti and Owen Murphy of Geita Gold Mine signed the document with the Tanzania Minister of Energy and Minerals Prof Sospeter Muhongo.
Computation of royalty payments will now be four per cent of gross value of minerals, instead of three per cent of net profit. However, royalty is set at five percent for all gemstones. Service levy will cease to be a flat rate $200,000 and graduate to 0.3 per cent of turnover, Prof Muhongo said.
The companies will also no longer enjoy a 15 per cent VAT tax waiver, whose removal in the past depended on a declaration of profits.
The deal is the culmination of a review ordered by President Jakaya Kikwete in 2008, when he appointed a presidential committee to review the mining sector and advise the government on royalty payments, income tax and levies payable by mining companies. The committee recommended these changes.
READ: Tanzania's taxman wants review of gas, mining deals
The Income Tax Act (2004) allowed mining companies to redeem provisional funds dedicated to environmental protection in implementing written conditions set out by the Income Tax Commissioner.
It also provided for a capital allowance, where companies with MDAs signed on July 1, 2001 were allowed to redeem more than 15 per cent of additional capital allowance on unredeemed qualifying capital expenditure. This has been scrapped.AngloGold Ashanti managing director Michael Van Anen said they were comfortable with the changes. 
On the scrapping of the 15 per cent allowance on capital expenditure, AngloGold Ashanti vice-president for taxation Owen Murphy said: “We have enjoyed this long enough; the change is welcome.”
Prof Muhongo said: “Tanzanians were right in complaining that we were not profiting as much as we should from mining.
“The situation has now been changed.” 

Source : http://www.theeastafrican.co.ke/news/Tanzania-seals-new-tax-deal-with-miners--drops-15pc-waiver-/-/2558/2483144/-/8xnhsjz/-/index.html
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