JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY

IN COLLABORATION WITH
KENYA SCHOOL OF REVENUE ADMINISTRATION

COURSE: POST GRADUATE DIPLOMA IN TAX ADMINISTRATION

UNIT: INTERNATIONAL TAX LAW AND PRACTICE
UNIT CODE: BRT 3107

QUESTION: EXAMINING ZAMBIA VS MOPANI COPER MINES PLC, MAY 2020,

SUPREME COURT OF ZAMBIA. CASE NO. 24/2017
GROUP FOUR
STUDENT’S NAME REGISTRATION NUMBER

CAVIN OBIERO - HDB 336 -1348/2023

PRUDENCE CHEPKORIR - HDB 336 -1356/2023
JOSPHAT TUTA - HDB 336 -1617/2023

CAT 1 (JANUARY – APRIL 2024)

SUBMITTED TO: MS. ANTOINETTE MATUNDURA

SUBMITTED ON: 07TH FEBRUARY, 2024

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 DEFINITION OF TERMS

SCZ – Supreme Court of Zambia

MCM – Mopani Copper Mines Plc

ZRA – Zambia Revenue Authority

ITA – Income Tax Act of Zambia

GIAG – Glencore International AG

LME – London Metal Exchange

OECD – Organization for Economic Cooperation and Development

ZMW – Zambian currency ‘Kwacha’

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TABLE OF CONTENTS PAGE

1.0 Introduction ………………………………………………………………… 3

1.1 Facts of the case …………………………………………………… 3
1.2 Issues in contest …………………………………………………… 4
2.0 Assessment Appeal ……………………………………………………........ 5
2.1Basis of Appeal …………………………………………………….. 5
3.0 Supreme Court Decision …………………………………………………… 6
3.1 Grounds for Supreme Court Appeal ……………………………..... 6
3.2 Supreme Court Findings ………………………………………….... 6
4.0 Supreme Court Ruling Implications ……………………………………….. 8
5.0 Referees ……………………………………………………………………. 9

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 1.0 Introduction
In May 2020, the Supreme Court of Zambia deliberated over a consequential dispute between
the Zambia Revenue Authority (ZRA), referred to as the respondent, and Mopani Copper
Mines Plc, referred to as the appellant, in a case registered under SCZ/8/269/2016. This case
was listed under the civil jurisdiction.
The appellant is a public limited company of a transnational nature, and its significant
economic activity is the mining and export of copper ore in Zambia. The respondent, in this
case, is the statutory body responsible for the assessment and collection of government taxes
on behalf of the Zambian government.
In the year 2008 mid-December, the ZTA, in exercising its statutory mandate, conducted a tax
audit on the Mopani Copper Mines Plc, focusing on their industry cost level, including a
review of their costings, revenue recognition, and the transfer pricing practices for 2006/2007,
2007/2008, and 2009/2010.
1.1 Facts of the case

The appellant was involved in economic operations for the periods under review both nationally
and internationally.

The appellant had interrelated party transactions during the periods reviewed by the revenue
agent.

The appellant had various transactions with a related party, which is its major shareholder, going
by the name Glencore International AG (GIAG).

The audit revealed irregularities in the transactional activities involving the appellant and the
related party, GIAG.

The appellant was served with an assessment of ZMW 311,113,798.38 for 2008/2009 and ZMW
140,891,939.89 for 2009/2010.

The appellant objected to the assessment and appealed to the Tax Tribunal.

The parties had a pretax settlement plan totaling K 100 billion.

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 1.2 Issues in contest

In rejecting the assessment, the appellant listed two principles upon which it believed the
ZTA could have erred in the whole process of the audit. In responding to the audit queries,
the appellant maintained that the transactions with the related party, GIAG, were at arm's
length and that the LME guided it.

The appellant argued that the source of information used by the respondent to determine the
assessed amount needed to be revised as they insisted on the application of the LME.

The appellant insisted that there was a failure on the part of the ZRA to take into account the
hedging agreement concluded between the appellant and GIAG, minimizing price risk
exposure.

The appellant and the GIAG sought an independent examination of the related party
transactions to clarify the basis for rejecting the assessment. This independent opinion was
issued by Messrs Deloitte and Touche, who examined the hedging transactions and
concluded that the transactions adhered to Chapter One of the OECD principles and that
GIAG received more favor than any other related parties in the market. The appellant argued
that this finding was binding between GIAG and ZRA. The apex court contested this
position.

The respondent adjusted its assessment based on the independent report of the Messrs
Deloitte and Touche report to 50% of sales volume to be at arm's length. The appellant
argued that 100% of the sales volume to be considered having been at arm's length.

The adjustment of 50% of sales volume meant that the assessed penalty payable was ZMW
112 800,760.63.

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 2.0 Assessment Appeal

The appellant, not being satisfied by the actions of the respondent to assess the sales volume
at 50% arm's length, appealed to the Zambian Tax Tribunal on three grounds.

2.1 Basis of the Appeal

That the Commissioner General erred in law and fact by ignoring the actual sales and
implementing his sales figures to determine tax payable.

The Commissioner General erred in both law and fact by not considering the independent
report by Deloitte and Touche in assessing tax due.

That the Commissioner General erred both in law and fact by imposing a price adjustment of
50% of the total sales volume for the period under review (2006/2007 and 2007/2008).

The Tribunal rejected the appeal.

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3.0 Supreme Court Decision

Dissatisfied with the Tribunal ruling, the appellant moved to seek redress in the Supreme Court
of Zambia.

3.1 Grounds for Supreme Court Appeal

The appellant made an appeal to the Tribunal decisions on seven grounds:

i. The Tribunal erred in law and fact in deciding that the independent review on hedging by
Deloitte was not binding to all the parties involved in the case.

ii.The Tribunal erred both in law and fact by holding that the respondent did not request the
Deloitte Report on failure to produce a formal demand issue during hearings as stipulated
under Section 11(3) of the ITA.

iii. The Tribunal erred in law and fact when it decided that the respondent was within the law
to invoke section 95 of the ITA in assessing the periods under consideration.

iv. The Tribunal erred both in law and fact by dismissing the appellant arguments on the
transfer hedging of the related party transactions.

v. The Tribunal erred both in law and fact by putting into doubt the legal status of the
appellant's hedging agreement with GIAG under the laws of Zambia.

vi. The Tribunal erred in law and fact by ordering the appellant to pay the sum of ZMW
311,113,798.38 for the period under review (2006 – 2008).

vii. The Tribunal erred in law and fact by holding that the appellant did not object to the
second tax assessment from 2008 to 2010.

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3.2 Supreme Court Findings

After the court deliberations, the below findings were made:

i. On the first and second grounds of appeal, the court agreed with the Tribunal's findings that
the Deloitte Report was neither binding to all the parties nor a request by the ZRA. It
needed to be clearer whether or not the respondent requested the report.

ii.On the third ground, the court agreed with the Tribunal that there were grievous findings by
the ZRA during the audit on the related party transactions that were reasonable enough to
invoke section 95 of the ITA.

iii. On the fourth and fifth grounds, the court concluded that the agreements did not become
law or a statutory instrument. The documents were to be produced before the courts for
examination, something they could have done better. Both grounds were dismissed.

iv. On the sixth ground, the court found out that the appellant had negotiated with the ZRA on
the payment plan, and the resulting amount payable was settled at K 100 billion. The
Tribunal had no legal authority to revise the figure payable to the original ZMW
311,113,798.38. This ground succeeded.

v. The seventh ground was dropped.

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4.0 Supreme Court Ruling Implications

The legal battle revealed the extent to which pre-negotiated or pre-tribunal tax resolution plans
hold within the resolution mechanism. The appellant's success on the sixth ground will ensure
that during any tax payment plan negotiations, the motive shall be to maximize revenue
collection.
The court ruling has helped Zambia put transfer pricing regulations and legislative frameworks
in place, which have greatly improved the audit capacity of various economic industries.
The ZRA now has more legal authority to deal with non-compliance with transfer pricing laws
and has provided more tax certainty to both Zambian businesses and the ZRA.
The Mopani ruling demonstrates the value of such targeted transfer pricing audit work in
underdeveloped nations where tax administration resources are limited. The impact extends well
beyond the tax cases as it proved evident to taxpayers that the tax administration can deal with
non-arms length transfer pricing.

5.0 References

1. Supreme Court of Zambia Ruling SZC/8/269/2016, case 24/2017

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