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Zambia: Supreme Court upholds transfer pricing adjustment of mining company

Zambia: Supreme Court, transfer pricing adjustment

The Organisation for Economic Cooperation and Development (OECD) today posted an item about a transfer pricing case in Zambia.

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As reported in the OECD release, the Supreme Court of Zambia in May 2020 ordered a mining company (taxpayer) to pay an additional tax of 240 million Kwacha (U.S. $13 million). The decision depended on the tax authority in Zambia making a technical case showing evidence of tax avoidance through base erosion and profit shifting (BEPS) strategies.

The case was one of the first large transfer pricing cases considered by the Zambian Revenue Authority. At issue was the pricing of copper sold to a shareholder company located in Switzerland. The tax authority contended that the taxpayer had under-priced copper sold to the Swiss entity, noting that the prices of copper sold to the Swiss entity were significantly lower than those of similar sales to third parties, and thus made a transfer pricing adjustment.

The Zambian Tax Appeals Tribunal in late 2016 upheld the tax assessments of the Zambian Revenue Authority, and the taxpayer appealed to the Supreme Court which upheld the tribunal’s decision.     

According to today’s OECD release, Zambia has made great efforts to combat abuses through BEPS in recent years by building the audit skills of Zambian Revenue Authority officials and improving the Zambian legislative framework for transfer pricing and other BEPS related issues. 

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