On 20 May 2020, the Supreme Court of Zambia has made a decision on a transfer pricing case relating to arm’s length transaction. Since 2009, the Zambia Revenue Authority (ZRA) has been battling with Mopani Copper Mines and its Swiss parent company Glencore International AG (a British multinational commodity trading and mining company with its headquarters based in Baar, Switzerland).

Pursuant to an audit during the period 2006 to 2009 of Mopani Copper Mines, the Zambia Revenue Authority found a departure from the arm’s length principle during the transactions between the company and its Swiss parent multinational.

In 2010, the ZRA appealed before the tribunal when Mopani Copper Mines failed to settle the tax liability. On 8 December 2010, The Tax Appeals Tribunal passed a ruling in favor of ZRA, obligating Mopani Copper Mines to pay the latter the tax liability.

In 2020, the Supreme Court ruled that any tax authority would find serious misgivings on the lack of arm’s length on the revealed transactions between Mopani and Glencore. The Court also found that Mopani abused transfer pricing and used it as a tool to avoid paying full taxes due to ZRA. The Court has fined Mopani Copper Mines ZMK 240 (about $13 million); ZMW 140 million covers tax liabilities from 2008 to 2010 while ZMW 100 million for the years 2006 to 2008

Due to the increasing incidence of tax avoidance, Zambia has been struggling to collect the correct amount of tax from the mining sector over the past few decades. Now Zambia wants to reduce illicit financial outflows in this sector to ensure more tax revenue is collected.