Zambia Reinstates 15% Export Duty on Gemstones

Image courtesy of Gemfields

Zambia Reinstates 15% Export Duty on Precious Gemstones

On January 1, 2025, the Zambian government reinstated a 15% export duty on precious gemstones, including emeralds, revoking the suspension that had been in place since 2019.

This unexpected move has significant implications for the gemstone industry, particularly for companies like Gemfields, which operates the Kagem emerald mine in partnership with Zambia's Industrial Development Corporation.

Background

The 15% export duty was initially introduced in 2019 but was suspended later that year following negotiations between the government and the emerald sector. The suspension aimed to promote growth and investment in Zambia's gemstone industry.

Current Implications

The reinstatement of the export duty increases the effective tax rate on revenues from the Kagem mine to 21%, when combined with the existing 6% mineral royalty tax. This is in addition to a 30% corporation tax, placing a substantial financial burden on gemstone producers.

For context, Zambia is among the world's top three emerald exporters, alongside Brazil and Colombia. In comparison, Brazil and Colombia have aggregate tax rates on revenues of 2% and 2.5%, respectively, in addition to corporation taxes of 34% and 33%.

Industry Response

Gemfields has expressed concern over the lack of prior consultation regarding the reinstatement of the export duty and plans to engage with the Zambian government to seek its suspension or removal. The company emphasizes that such a tax could impact the sustainability and attractiveness of the sector for investment.

Conclusion

The reintroduction of the 15% export duty on precious gemstones by the Zambian government presents challenges for the gemstone industry, potentially affecting investment and operational decisions. Stakeholders are advised to monitor developments closely and assess the implications for their operations and strategies.