Zero VAT rate on gold supplied to BoT in offing

DODOMA: THE government is expected to introduce zero rate Value Added Tax (VAT) on gold supplied to the Bank of Tanzania (BoT to incentivise supply of gold, thus increase the country’s foreign currency reserve and reduce shortage of US dollars.

Tabling the national budget for 2024/25 totaling 49.35tri/-, which is equivalent to an increase of 11.2 per cent compared to the 2023/24 budget, Finance Minister, Dr Mwigulu Nchemba said the government proposed move aims to stimulate the growth of gold refining industries in the country as the BoT purchases gold only after being refined by domestic refineries.

“The government continues to encourage local gold refining industries to obtain the London Bullion Market Association (LBMA) certification to enhance quality, gold reserve and marketability top add to the milestones achieved in the mining sector,” he said.

The proposed zero VAT rate on gold supplied to domestic refineries is also intended to promote the growth of domestic refineries in the country by ensuring that they have enough feedstock. Furthermore, the measure is intended to fulfill the government’s intention of ensuring that raw gold minerals are refined in the country for value addition before being exported.

Moreover, the government plans to abolish VAT on supply of precious metals, gemstones and other precious stones at refineries to increase the contribution of the mining sector to the GDP.

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“This measure is expected to increase government revenue by 18.5bn/- as the purpose of the measure is to widen the tax base and observe equity principles in taxation.

The government will also introduce the withholding tax at the rate of 2 per cent for payments received in purchase of industrial minerals.

However, withholding tax will not apply on salt, metallic minerals or other precious minerals as stipulated in the Mining Act, Cap 123 when sold by Primary Mining Licencee or Artisanal miner.

The minister also proposed to make amendments in the Mining Act, CAP 123 to amend Section 90A (3) of the Mining Act, CAP 123 and to exempt the supply of gold to BoT paying inspection fee of 1 per cent.

The measure is intended to incentivise the supply of gold to BoT as well as reduce associated cost so as to enhance growth of national gold and foreign currency reserve, and as well address the shortage of US dollars for various international circles.

The government also plans to reduce the royalty rate from six per cent to two per cent on the supply of gold sold to the BoT. This amendment goes parallel with making royalty paid to the gold supplied to the BoT as a final payment.

The amendment in the Mining Act intends to reduce the royalty rate from four percent to two per cent on the supply of gold to be sold to the domestic refineries.

The measure is intended to incentivise the supply of Gold to the domestic refineries and ensure availability of feedstock It also entails amending Section 59 of the Mining Act, CAP 123, by requiring the mineral right holders and the mineral dealers to set aside minerals for processing, smelting, refining and trading within the Country.

However, the amount of minerals to be set aside will be determined by the Minister responsible for minerals in the Mining (Mineral and Gem Houses) Regulations 2019, as for starters 20 per cent of gold will be set aside for the mentioned purpose.

The provision will not apply to mining companies having a signed agreement with the government for the objectives of carrying out mining projects in the country.

Further, the government will renegotiate with mining companies for the purpose of considering the possibility of implementing the requirements of this provision without affecting the terms to the Agreement. They will also recognise BoT as the Statutory Gold Dealer.

The measure is intended to harmonise the BoT Act and the Mining Act by addressing the existing ambiguity as well as enhancing smooth purchases of Gold by the BOT for the purpose of growth of National gold and foreign currency reserve in the country.

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