- The stand from the Budget presented by the Minister for Finance and Planning, Hon. Dr. Philip Mpango
- A hint on the effect of the reports from the 1st and 2nd Committees on exportation of mineral concentrates
- A highlight of the mining legislation’s reviews and enactments in the recent years
The Minister for Finance and Planning, Hon. Dr. Philip I. Mpango (MP) while delivering his 2017/2018 Budget Speech on the 8th June 2017 at the National Assembly declared an intended Government’s ban on transportation of minerals from the mine sites. This is intended to enhance Government’s control and monitoring strategy over mineral exportation with a view of ensuring revenue collection from minerals.
It has been directed by the Government that transportation shall be through special international aerodromes in the mine sites and harbours/ports and exit border points. Moreover, the exporter shall be obliged to make an application for minerals’ exportation permit. The Government’s clearing fee for the export permit shall be 1% of the value of the said minerals.
Hon. Dr. Mpango submitted further that the Government shall notify the public of the date that the Government fee shall commence its operation. Breakthrough Attorneys calls upon all interested stakeholders in the mining sector to note these changes and directives from the Government for compliance purposes.
The speech by the Finance Minister came days after the first report of the Presidential Committee of technical experts on gold-copper concentrates. The legal and institutional framework on the mining sector in Tanzania, is set to be overhauled especially in exportation and transparency. Another report by the Presidential Committee comprising of Engineers and Lawyers presented its findings and recommendations on Monday 12th June, 2017. It is noteworthy that out of the said reports, the Government has resounded an intention to reopen and review MDAs (Mining Development Agreements) with the investors as well as reviewing all legislation on mining and tax.
Another thing worth noting is that; the Finance Bill, 2017 introduced by the Ministry for Finance and Planning on the 14th day of 2017 and published on the official website of the United Republic of Tanzania has proposed amendment of Sections 18(3), 90 and 112 of the Mining Act, (Cap 123). The amendment is on the introduction of inspection fee on minerals to be exported outside the country.The fee proposed is 1% of the gross value (market value of minerals at the point of refining or sale or, in the case of consumption within Tanzania at the point of delivery within Tanzania). The inspection fee is mandatory and payable to the Government.
The corporate department at Breakthrough Attorneys has prepared a summary of legislative developments in the mining sector for ease of reference to the general public and interested stakeholders.
|YEAR OF ENACTMENT
|SUMMARY OF KEY FEATURES
|The Mining (MinimumShareholding and Public Offering) Regulations, 2016
|These Regulations makes it mandatory for the mining companies with special mining licenses to issue shares to the public.
These Regulations makes it mandatory for the minimum local shareholding requirement of a holder of Special Mining Licence to be thirty percent (30%) of the total issued and paid up shares.
The Regulations provides further that the 30% shareholding requirement shall be made through the Initial Public Offers (IPOs), subject to approval of the Capital Markets and Securities Authority regulated under the Capital Market and Securities Act, [CAP 79 R.E 2002]
While referring to these Regulations, one should go through the Mining (Minimum Shareholding and Public Offering) (Amendment) Regulations, 2017 (‘Amended Regulations) as the same amended the Mining (MinimumShareholding and Public Offering) Regulations, 2016.
A license holder who fails to comply with the requirements under these Regulations shall be in default and his/her Mineral Right may be subject to suspension or cancellation as per section 63 of the Mining Act, 2010.
|The Income Tax Act, Cap 332
|This Act sets out a special regime on matters of taxation for the mining sector in Tanzania i.e. Corporate Income Tax, Withholding Taxes, Taxes on Royalties, Transfer Pricing, etc.
The mining sector enjoys a number of statutory tax reliefs and deductions. For instance, Section 15(3) allows mining companies to redeem provisional funds dedicated to environmental protection. There is 100% capital allowance in the year of expenditure in computation of that year’s taxable income, etc.
|Finance Act, 2016
|This Act introduced new taxing provisions for mining operationsin Tanzania. Among other things, the Act mainly amended the provisions of Income Tax Act, 2004 on the taxation for the mining sector.
For instance; Section 65K (2) of the Act introduced corporate income tax from mining operations. The same was set at the rate of 30%;
Section 65F (1) (a)-(c) of the Act provided for the limitations on deductions of losses from separate mineral operations. It provides that the Income from a separate mining operation may not be reduced by a loss from any other activity or operation. It provided further that reduction for losses from a particular operation are limited to 70% of the respective income from such operation (See Section 65F (1) (c) of the Act).
Section 65E (1) (a)-(d) provides for allowable deductions in calculating the person’s income from a mining operation. To include (a) annual charges and royalties, (b) depreciation allowances granted with respect to the mining operation and calculated in accordance with paragraph 5 of the Third Schedule, (c) contributions to and other expenses incurred in respect of rehabilitation fund; and (e) expenses incurred in respect of acquisition of rehabilitation bond.
|The Value Added Tax Act
|This Act provides for VAT taxation on services under mining sector and minerals/mining products. Most of the time these services and product are free from VAT.
For instance, all exports are charged zero VAT rate, therefore exportation of minerals is not taxable in VAT. Item 10 of Part II of the VAT Schedule also provides for relief on import of goods by a registered and licensed mineral explorer or prospector to the extent that those goods are eligible for relief from customs duties under the East African Customs Management Act, 2004.
|Environmental Management Act (Act No. 20 of 2004).
|This Act is regulates mining activities i.e. extraction of minerals, in a way that the activities do not affect the environment. Among other things, it provides for legal and institutional framework for sustainable management of environment; principles for management, impact and risk assessments, prevention and control of pollution, waste management, environmental quality standards, etc.
Section 81(1), (2) and (3) of the Act requires applicants of mineral rights to undertake Environmental and Social Impacts Assessment (ESIA) before approval of their projects.
Section 73 of the Act requires any matter or activity relating to protection and conservation of natural and cultural heritage to take into account necessary requirements for the protection of environment.
|Environmental Impact Assessment and Audit Regulations, 2005.
|These Regulations provides for the manner that Environmental Impact Assessment (EIA) to be conducted. Also on the environmental auditing. Among other things, it specify that mining extraction projects should only be initiated after a conducting the EIA and therefore EIA Certificate to be issued.
Regulation 46(3) of these Regulations requires environmental auditor or environmental inspector who shall be an expert or a firm of experts registered in accordance with the Environmental (Registration of Environmental Experts) Regulations, 2005 to conduct environmental audit, which will include review of plans and designs of waste storage facilities.
|Environmental (Registration of Environmental Experts) Regulations, 2005 (G.N. No. 348 of 2005)
|The Regulations provide for the certification and registration of Environmental Experts and contain rules relative to the practice and discipline of Environmental Experts and define functions, powers and internal organization of the Committee.
|Environmental Management (Soil Quality Standards) Regulations, 2007.
|These Regulations concern soil pollution and soil quality standards and provide with respect to a soil protection permit and compliance system. They also concern measures of enforcement. They also provide for the activities done by National Environmental Standards Committee i.e. prescribing guidelines to ensure that anthropogenic activities such as mining, agricultural activities, as well as solid and liquid waste disposal do not degrade the soils, etc.
|Environmental Management (Water Quality Standard) Regulations, 2007.
|The Regulations provides for appropriate environmental standards in place for surface and ground water. It also sets appropriate penalties should be put in place in case standards are compromised.
Part III and Part VII of these Regulations provide for water quality standards and penalties respectively.
|Tanzania Investment Act, 1997
|This Act contains provisions that prohibit expropriation of property i.e. minerals without due process of law that guarantees fair and speedy compensation, guarantee of profit, and capital repatriation as well as access to international arbitral process.
|Mining Act, No. 15 of 2010 (“the Mining Act”)
|This Act sets out the legal framework governing mineral exploration, exploitation, and marketing; it establishes state ownership of minerals; it also provide rights and conditions to explore minerals.
Section 6 of this Act prohibits any person to prospect or mine minerals without having a valid mineral right granted under the Act.
The regulations made under the Act concerning mineral rights, environmental protection, mineral beneficiation, safety and occupational health, mineral trading and mining of radioactive material.
|The Mining (Mineral Rights) Regulations, 2010
|These Regulations provide for the manner that one may acquire rights and licenses for conducting mining activities i.e. How to make applications for Primary Mining License, Mineral Rights under division “A”, Special Mining License or Mining License under division “B”.
|The Mining (Environmental Protection for Small Scale Mining) Regulations, 2010
|These legislations provide for the manner that small scale mining could be implemented without causing environmental impacts
Part II and Part IV of these Regulations outline requirements aimed at reducing social and environmental impacts resulting from small scale mining activities.
|The Mining (Safety, Occupational Health and Environmental Protection) Regulations, 2010
|The Regulations provide for the manner in which the miners shall conduct mining activities in safety, health while protecting the environment.
Regulation 51 of these Regulations requires mining entities to develop mine rescue emergency plans; and conduct training for mine rescue.
Regulations 177 and 178 require mining entities to ensure that waste dumps and tailings storage facilities are well designed, operated and maintained.
Regulation 206 of these Regulations provides requirements for mine closure plans to be submitted by applicants of special mining and mining licenses. It also give guidance on posting of adequate financial assurance for mine closure by holders of special mining licenses and mining licenses.
|The Mining (Mineral Trading) Regulations, 2010
|These Regulations provide for manners in which trading rights for different kinds of minerals may be acquired in Tanzania. Among other things; it provides that miners and mineral dealers must own either a mining or dealer license to be able to acquire, dispose, sell or export minerals.
|The Mining (Radioactive Minerals) Regulations, 2010
|These Regulations provide for the manner that radioactive mineral extraction are regulated in Tanzania.
Regulation 6 of these Regulations provides that a person is not authorized to acquire, store, transport, import or export radioactive minerals unless they have obtained a permit issued by the Minister responsible for mineral affairs (the Minister).
Regulation 5 of the these Regulations provides that applicants for a license to prospect, mine or process radioactive minerals are required to adhere to the provisions of the Mining Act.
|The Mining (Mineral Beneficiation) Regulations, 2010
|These regulations were made for regulating matters of benefaction of minerals. The Regulation sets out manner and procedure for application and renewal of processing license, their fees, etc.
|The Mining Development Agreement Model 2010 (MDA)
|MDA is a mechanism within the Tanzania Mining Act (2010) for the holders of a Special Mining Licence (SML) to ensure the rights of both parties are fully defined and protected. These include matters of profit sharing, fiscal stability which ensures all taxation, royalties and duties are fixed for the term of the MDA, etc. in MDAs.
|The Mining (Salt production and Iodation) Regulations, 1999
|These regulations provide for regulation of production and iodation of salt in Tanzania. The Regulations, for among other things provide for salt testing by salt inspectors for ensuring that salt produced meet the required standards.
|The Merelani (Controlled Area) Regulations, 2002
|These Regulations were made for Tanzania to comply with the Tucson Tanzanite Protocol that was signed in February 2002 in order to restore confidence in Tanzanite trading. Other requirements of the protocol include construction of fence around controlled area and introduction of Tanzanite warranty for all Tanzanite exports.
|The Mining (Diamond Trading) Regulations, 2003
|These Regulations set out the manner of acquiring and dealing with trading rights for diamond minerals in Tanzania.