A legal clash over the definition of lithium beneficiation is fuelling a standoff between Zimbabwe’s lithium producers and the government, with miners warning that conflicting laws are inflating taxes and threatening investment agreements.
At the centre of the row is a contradiction between the Base Minerals Export Control Act, overseen by the Ministry of Mines, and the VAT Act, under the Ministry of Finance, and administered by ZIMRA.
According to the miners, current royalties are being based on lithium carbonate — a high-value, refined product typically processed in China — instead of the lithium concentrates, such as spodumene and petalite, that Zimbabwean mines currently process and export.
In his 2024 budget, Finance Minister Mthuli Ncube gave miners until March last year to start producing lithium carbonates, saying “lithium value addition process that does not result in the production of lithium carbonate is not regarded as beneficiation, hence, is liable to (a 5%) export tax”.
Now, miners say ZIMRA is calculating taxes based on lithium carbonate, a product that comes after refining concentrates.
In a report to government, the miners warn of a legal contradiction that is creating confusion: There is a misalignment of legislation on the definition of ‘unbeneficiated’ between the Base Minerals Export Control Act and the VAT Act.
According to the VAT Act, lithium is considered unbeneficiated until the lithium carbonate stage. However, Zimbabwe’s lithium strategy and the Base Minerals Export Control Act consider sulphates to be the agreed first stage of local value addition.
Statutory Instrument 57 of 2023, issued under the Base Minerals Export Control Act, defines “unbeneficiated” lithium as any lithium that has not undergone processing. Spodumene concentrates with lithia content of at least 3%, and petalite and lepidolite with 2.5% lithia content, are considered beneficiated under this law. But the clash with the VAT Act means miners are being taxed as if they are already producing carbonate.
“Royalties are therefore being calculated by ZIMRA on the foreign-made value-added product instead of what is being produced and exported from Zimbabwe,” say the miners. “The wording of the statute on royalties in the Finance Act is such that it can be misinterpreted to include costs of foreign value addition.”
Zimbabwe has positioned itself as a key player in the global lithium supply chain, but miners warn that the country risks losing competitiveness if current tax measures are not reviewed. Miners invested over US$1 billion to acquire lithium assets and build processing plants.
However, the collapse of lithium prices, which are down nearly 90% since their peak in 2022, have slowed down investment and put miners under pressure, at a time government is demanding more value from them.
To ease pressure, the lithium producers are proposing a temporary exemption from the 5% export tax until December 31, 2027, by which time they expect to have completed their plants.
In addition to the tax reprieve, the producers also want a waiver of legacy debts related to the 5% export tax, arguing that the debts arose from a legislative flaw: “The challenge faced by the lithium miners was misalignment of definitions between the VAT Act and the Base Minerals Export Control Act.”
Last year, the government announced that mining operations would no longer be eligible for Special Economic Zone (SEZ) export tax exemptions. However, miners insist that existing SEZ status for Prospect Lithium Zimbabwe (PLZ) should remain valid.
“Although some income tax incentives have been cancelled for PLZ, the SEZ is still valid and therefore the company qualifies for the exemption,” the report says.
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