Friday, July 12, 2024

Tax dispute between Mozambique and Rio Tinto over unpaid taxes from the sale of mineral assets

The Mozambican state is seeking to recover around 239 million US dollars in unpaid taxes related to Rio Tinto’s sale of coal mining assets in Tete province in 2014. The controversy arose after the company declared only 50 million dollars in the transaction to the Indian state consortium International Coal Ventures (ICVL), raising suspicions of an evasive tax strategy.
According to information from the Tax Authority (AT), the state claims that the amount declared by Rio Tinto was merely a tax ruse to evade tax obligations in Mozambique. In response, the AT formed a team of experts who concluded that the amount declared was “unrealistic and unacceptable” from a tax point of view, and did not reflect the real market value of the assets.
The coordinator of the Extractive Industry Taxation Unit, Aníbal Mbalango, explained that the AT’s analysis identified impairment losses not recognized by the technical team. In addition, the absence of an opinion from an independent entity and feasibility studies for the deal raises doubts about the validity of the figures presented by Rio Tinto.

The impasse is coming to a head at a time when Rio Tinto has agreed to pay 28 million dollars to a US court to end a fraud case related to its investment in coal in Tete. The pressure on the company also includes a second case concerning the sale of Riversdale to Rio Tinto in 2011, worth 3.9 billion dollars, where the issue of paying capital gains tax is open, amounting to more than 8.6 billion meticais.
After attempts at negotiation, the Mozambican tax authorities settled the tax on the transaction at 239.27 million dollars. Mbalango points out that, in addition to this case, the AT continues to work on resolving the second case, seeking to guarantee fair taxation and the integrity of the country’s tax system. The outcome of these tax disputes will have significant implications not only for the state’s finances, but also for the investment environment in Mozambique.

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