Writing off the cost of capital assets through depreciation allowances is an important issue for extractive industries due to the significant upfront investments up and above the other operating expenditure.
In a bid to encourage investment, the Zimbabwean tax system recognises the cost of the investment by allowing a tax deduction for capital expenditure in the form of capital redemption allowances
Like any other trader, miners are taxed on income realised from their operations and they are, however, other specific deductions that are applicable to their business operations.
Section 15(2) (f)(i) as read with the 5th Schedule of the Income Tax Act provides for the deduction of capital redemption allowances in lieu of the general capital allowances for other taxpayers.
In addition, miners who operate special mining leases do claim Capital Redemption Allowances in terms of 15 (2) (f) as read with the 22nd Schedule to the Income Tax Act.
These capital redemption allowances are restricted to a specific mining location unless the operations are inseparable & substantially interdependent.
Mining companies are permitted to elect any one of the following methods to claim capital redemption allowances depending on their status i.e. mine owner and contributor:
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