Professional Documents
Culture Documents
24 November 2008
No. 31635
THE PRESIDENCY
No. 1260 24 November 2008
It is hereby notified that the President has assented to the following Act, which is
hereby published for general information:
No. 28 of 2008: Mineral and Petroleum Resources Royalty Act, 2008.
ACT
To i m p o s e a royalty o n the transfer of mineral resources a n d to p r o v i d e for m a t t e r s
connected therewith.
IT E N A C T E D
follows:
by the
Parliament
of the Republic
of
South Africa,
as
ARRANGEMENT OF SECTIONS
Section
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
Definitions
Imposition of royalty
D e t e r m i n a t i o n of royally
Royalty formulae
Earnings before interest and taxes
G r o s s sales
Small b u s i n e s s e x e m p t i o n
Exemption for sampling
Rollover relief for disposals involving going c o n c e r n s
Transfer involving body of unincorporated persons
A r m ' s length transactions
General anti-avoidance rule
C o n c l u s i o n of fiscal stability a g r e e m e n t s
Terms and conditions of fiscal stability a g r e e m e n t s
Foreign currency
Transitional credits
Act binding on State and application of other laws
Short title and c o m m e n c e m e n t
Schedule 1
Schedule 2
Definitions
1. (1) In (his Act. unless the context indicates o t h e r w i s e
" A d m i n i s t r a t i o n A c t " m e a n s the Mineral and Petroleum Resources Royalty
( A d m i n i s t r a t i o n ) Act. 2 0 0 8 ;
" e a r n i n g s before interest a n d t a x e s " m e a n s earnings before interest and taxes
m e n t i o n e d in section 5;
" e x t r a c t o r " m e a n s a person mentioned in section 2;
" g r o s s s a l e s " m e a n s gross sales m e n t i o n e d in section 6:
" I n c o m e Tax A c t " m e a n s the I n c o m e Tax Act, 1962 (Act N o . 58 of 1962);
" M i n e r a l and P e t r o l e u m R e s o u r c e s D e v e l o p m e n t A c t " m e a n s the Mineral and
Petroleum R e s o u r c e s D e v e l o p m e n t Act. 2 0 0 2 (Act N o . 28 of 2002);
" m i n e r a l r e s o u r c e " m e a n s a mineral or petroleum as defined in section 1 of the
Mineral and P e t r o l e u m R e s o u r c e s D e v e l o p m e n t Act. r e g a r d l e s s of w h e t h e r that
(b) T h e percentage determined in terms of subsection (2) m u s t not exceed 7 per cent.
E a r n i n g s before interest and t a x e s
5. (1) For purposes of the formula in section 4(1), " e a r n i n g s before interest and
t a x e s " in respect of a year of assessment m e a n s the a g g r e g a t e of
(a) the gross sales of the extractor during that year in respect of refined mineral
resources; and
(b) so m u c h of the amount allowed to be d e d u c t e d from i n c o m e in terms of the
I n c o m e Tax Act (whether in that year or a p r e v i o u s year of a s s e s s m e n t ) in
respect of the use of assets, or e x p e n d i t u r e incurred, directly in respect of
mineral resources transferred on or after 1 M a y 2 0 0 9 to win, recover and
d e v e l o p those mineral resources to the condition specified in S c h e d u l e 1, as is
included in the income of the extractor during that year of a s s e s s m e n t in terms
of section 8(4) of that Act (disregarding the e x c e p t i o n in respect of section
15(a) of that A c t ) , but not including an a m o u n t that is received or accrued
from the disposal of assets the cost of which has in w h o l e or in part b e e n
included in capital expenditure taken into account as m e n t i o n e d in the
definition of "capital expenditure i n c u r r e d " in section 36(11) of that Act,
less any a m o u n t which in terms of that Act is allowed to be d e d u c t e d from the i n c o m e
of the extractor during that year of a s s e s s m e n t in respect of assets used or e x p e n d i t u r e
incurred directly to win, recover and d e v e l o p those refined mineral resources to the
condition specified in Schedule 1 for those mineral r e s o u r c e s .
(2) F o r purposes of the formula in section 4(2), " e a r n i n g s before interest and t a x e s "
in respect of a year of assessment m e a n s the aggregate of
(a) the gross sales of the extractor during that year in respect of unrefined mineral
resources; and
(b) so m u c h of the a m o u n t allowed to be d e d u c t e d from income in terms of the
I n c o m e Tax Act (whether in that year or a p r e v i o u s year of a s s e s s m e n t ) in
respect of the use of assets, or expenditure incurred, directly in respect of
mineral resources transferred on or after 1 M a y 2 0 0 9 to win, recover and
d e v e l o p those unrefined mineral resources, as is included in the i n c o m e of the
extractor during that year of assessment in terms of section 8(4) of that Act
(disregarding the exception in respect of section 15(a) of that Act), but not
including an amount that is received or a c c r u e d from the disposal of assets the
cost of which has in w h o l e or in part been included in capital e x p e n d i t u r e
taken into account as mentioned in the definition of "capital e x p e n d i t u r e
i n c u r r e d " in section 36( 11) of that Act,
less any a m o u n t which in terms of that Act is allowed to be d e d u c t e d from the i n c o m e
of the extractor during that year of a s s e s s m e n t in respect of assets used or e x p e n d i t u r e
incurred directly to win. recover and d e v e l o p those unrefined mineral resources to the
condition specified in S c h e d u l e 2 for those mineral r e s o u r c e s .
(3) F o r p u r p o s e s of subsections (1) and (2), " e a r n i n g s before interest and t a x e s " is
d e t e r m i n e d without regard t o
(a) any deduction in respect of a financial instrument as defined in section 1 of the
I n c o m e Tax Act (other than an instrument that is an option contract, forward
contract or other instrument the value of which is derived directly or indirectly
with reference to mineral resources):
(b) any deduction allowed in terms of section 111(a)of the I n c o m e Tax Act in
respect of the royalty;
(c)
(i) in the case of mineral resources refined to the condition specified in
Schedule 1 for those mineral resources, any deduction for e x p e n d i t u r e
(ii)
(d)
any balance of assessed loss mentioned in section 20(1 )(a) of the I n c o m e Tax
Act, unless the b a l a n c e of assessed loss arises in respect of capital e x p e n d i t u r e
taken into account for purposes of paragraph 5( 1) of t h e Tenth S c h e d u l e of the
I n c o m e Tax Act;
(e) any deduction allowed in terms of section 24I of the I n c o m e Tax A c t ;
(f) any determination in respect of an impermissible tax a v o i d a n c e a r r a n g e m e n t
c o n t e m p l a t e d in Part IIA of the I n c o m e Tax Act; or
(g) any deductions contemplated in paragraph 5(2) of the Tenth S c h e d u l e to the
I n c o m e Tax Act.
(4) (a) For p u r p o s e s of determining " e a r n i n g s before interest and t a x e s " in the case
of a c o m p o s i t e of refined mineral resources and unrefined mineral resources, the refined
and unrefined proportions of the c o m p o s i t e mineral r e s o u r c e m u s t be d e t e r m i n e d in
a c c o r d a n c e with a m e t h o d of reasonable apportionment that is consistently applied.
(b) F o r p u r p o s e s of d e t e r m i n i n g " e a r n i n g s before interest and t a x e s " , if the value of
the refined proportion of a c o m p o s i t e mineral r e s o u r c e as d e t e r m i n e d in terms of
subsection (1) does not exceed 10 per cent of the total value of that c o m p o s i t e mineral
resource, that c o m p o s i t e mineral resource m a y be treated solely as an unrefined mineral
resource, and if the value of the unrefined proportion of a c o m p o s i t e mineral resource as
so d e t e r m i n e d does not exceed 10 per cent of the total value of that c o m p o s i t e mineral
resource, that c o m p o s i t e mineral resource m a y b e treated solely as a refined mineral
resource.
(5) F o r p u r p o s e s of this section, if " e a r n i n g s before interest and taxes'" is a negative
a m o u n t that a m o u n t is d e e m e d to be nil.
G r o s s sales
6. (1) G r o s s sales in respect of a refined mineral resource t r a n s f e r r e d
(a) as mentioned in paragraph fa) of the definition of " t r a n s f e r " in section 1 in the
condition specified for that mineral r e s o u r c e in S c h e d u l e 1 is the a m o u n t
received or accrued during the year of a s s e s s m e n t in respect of the transfer of
that mineral resource;
(b) as m e n t i o n e d in paragraph (a) of the definition of " t r a n s f e r " in section 1 in a
condition other than that specified for that mineral r e s o u r c e in S c h e d u l e 1 is
the a m o u n t that would have been received or accrued d u r i n g the year of
a s s e s s m e n t in respect of the transfer of that mineral r e s o u r c e had that mineral
r e s o u r c e been transferred in the condition specified in S c h e d u l e 1 for that
mineral resource in terms of a transaction entered into at a r m ' s length: and
(c) as mentioned in paragraph (b) or (c) of the definition of " t r a n s f e r " in section
1 is the a m o u n t that would have been received or accrued d u r i n g the year of
a s s e s s m e n t in respect of the transfer of that mineral r e s o u r c e had that mineral
resource been transferred in the condition specified in S c h e d u l e 1 for that
mineral resource in terms of a transaction entered into at a r m ' s length.
(2) G r o s s sales in respect of an unrefined mineral resource transferred
(a)
(c)
(d)
any other person at any time during that year holds the right to participate
(directly or indirectly) in m o r e than 5 0 p e r cent of the profits of the extractor
and more than 5 0 per cent of the current or a c c u m u l a t e d profits of any other
extractor; or
(he extractor is a registered person mentioned in section 4 of the A d m i n i s t r a
tion Act.
E x e m p t i o n for s a m p l i n g
8. An extractor is e x e m p t from the royalty i m p o s e d in respect of mineral resources
won or recovered by the extractor for purposes of testing, identification, analysis and
s a m p l i n g mentioned in section 2 0 of the Mineral and Petroleum R e s o u r c e s D e v e l o p
ment Act pursuant to a prospecting right or an exploration right as defined in section 1
of that Act if the gross sales in respect of those mineral resources d o e s not e x c e e d
R 1 0 0 0 0 0 during a year of assessment.
R o l l o v e r relief for disposals involving g o i n g c o n c e r n s
9. (1) For p u r p o s e s of this Act a disposal of a mineral resource b y an extractor that
forms part of the disposal of a going c o n c e r n , or of a part of a going concern w h i c h is
c a p a b l e of separate operation, by that extractor to any other extractor is d e e m e d not to
be a disposal.
(2) F o r p u r p o s e s of this Act an extractor that acquires a mineral resource in t e r m s of
a disposal mentioned in subsection (1) is d e e m e d to be the extractor that w o n or
recovered the mineral resource.
Transfer i n v o l v i n g b o d y of u n i n c o r p o r a t e d p e r s o n s
10. (1) N o t w i t h s t a n d i n g any other provision in this Act, an unincorporated b o d y that
is registered as a person under the Administration A c t
(a) is d e e m e d to be an extractor while that registration r e m a i n s in effect; and
(b) is subject to the royalty as if that body were an extractor separate from its
m e m b e r s , in respect of mineral r e s o u r c e s w o n , r e c o v e r e d or transferred by
that unincorporated body after taking into account any earnings before interest
and taxes associated with those minerals as well as the application of any other
provision of this Act b e a r i n g on the royalty determination in respect of those
mineral resources.
(2) N o t w i t h s t a n d i n g any other provision in this Act. to the extent that any m e m b e r of
an unincorporated body mentioned in subsection (1) is acting in a capacity other than as
a m e m b e r of that body, that m e m b e r is subject to the royalty as if that m e m b e r were an
extractor separate from that body in respect of mineral resources won, r e c o v e r e d or
transferred by that unincorporated b o d y after taking into account any e a r n i n g s before
interest and taxes associated with those minerals as well as the application of any other
provision of this Act bearing on the royalty determination in respect of those mineral
resources.
(3) On the date of the election m a d e in terms of section 4(1) of the A d m i n i s t r a t i o n Act,
the m e m b e r s of an unincorporated body mentioned in that section are d e e m e d to have
transferred the mineral resources to be disposed of by that body, w h i c h had been won or
recovered by those m e m b e r s .
(4) On the dale on which an unincorporated body terminates the election in terms of
section 4(6) of the Administration Act, the unincorporated body is d e e m e d to h a v e
transferred the mineral resources won or recovered by the unincorporated b o d y to the
m e m b e r s of that unincorporated body.
A r m ' s length transactions
11. (1) To the extent that the earnings before interest and taxes d e t e r m i n e d in terms of
section 5 differ from the earnings that an extractor w o u l d have taken into account if
those e a r n i n g s had been derived from transactions entered into at a r m ' s length, the
C o m m i s s i o n e r may adjust the earnings to reflect the e a r n i n g s that would h a v e been
taken into account.
(2) To the extent that the gross sales determined in t e r m s of section 6( 1 )(a) or section
6(2)(a) differ from the gross sales that an extractor would have taken into account if the
gross sales had been derived from transactions entered into at a r m ' s length, the
C o m m i s s i o n e r may adjust the gross sales to reflect the gross sales that would have been
taken into account.
G e n e r a l a n t i - a v o i d a n c e rule
12. (1) N o t w i t h s t a n d i n g anything to the contrary in this Act, if the C o m m i s s i o n e r is
satisfied that a disposal, transfer, operation, s c h e m e or u n d e r s t a n d i n g (whether entered
into or carried out before or after the c o m m e n c e m e n t of this A c t )
(a) has been entered into or carried out. which has the effect of avoiding or
postponing liability for the royalty, or of reducing the a m o u n t thereof;
(b) having regard to the circumstances under which the disposal, transfer,
operation, s c h e m e or understanding w a s entered into or carried o u t
(i) was entered into or carried o u t
(aa) in the case of a disposal, transfer, operation, s c h e m e or understand
ing in the context of business, in a m a n n e r w h i c h would not
normally be e m p l o y e d for bona fide business p u r p o s e s , other than
the obtaining of a royalty benefit; and
(bb) in the case of any other disposal, transfer, operation, s c h e m e or
understanding not falling within the provisions of item (aa), by
m e a n s or in a m a n n e r which would not normally be e m p l o y e d in the
entering into or carrying out of a disposal, transfer, operation,
s c h e m e or understanding of the nature of the disposal, transfer,
operation, s c h e m e or understanding in question; or
(ii) has created rights or obligations which w o u l d not normally be created
between p e r s o n s dealing at a r m ' s length u n d e r a disposal, transfer,
operation, scheme or understanding of the nature of the disposal,
transfer, operation, scheme or understanding in question; and
(c) was entered into or carried out solely or mainly for the p u r p o s e s of obtaining
a royalty benefit,
the C o m m i s s i o n e r must d e t e r m i n e the liability for the royalty, and the a m o u n t thereof,
as if the disposal, transfer, operation, s c h e m e , or understanding had not been entered
into or carried out, or in such m a n n e r as the C o m m i s s i o n e r in the c i r c u m s t a n c e s d e e m s
appropriate for the prevention or diminution of a v o i d a n c e , p o s t p o n e m e n t or reduction.
(2) A decision of the C o m m i s s i o n e r under subsection (1) is subject to objection and
appeal m e n t i o n e d in section 18(l)(d) of the A d m i n i s t r a t i o n Act. and w h e n e v e r in
p r o c e e d i n g s relating thereto it is proved that the disposal, transfer, operation, s c h e m e or
understanding in question would result in the avoidance or p o s t p o n e m e n t of liability for
the royalty, or in the reduction of the a m o u n t thereof, it is p r e s u m e d , until the contrary
is proved, in the case of any such disposal, transfer, operation, s c h e m e or u n d e r s t a n d i n g ,
that it w a s entered into or carried out solely or mainly for the p u r p o s e s of the a v o i d a n c e
or the p o s t p o n e m e n t of such liability, or the reduction of the a m o u n t of such liability.
(3) For p u r p o s e s of this section, "royalty benefit" includes any a v o i d a n c e ,
p o s t p o n e m e n t or reduction of the liability for p a y m e n t of the royalty mentioned in
section 2.
C o n c l u s i o n of fiscal stability a g r e e m e n t s
13. (1) T h e Minister of F i n a n c e may c o n c l u d e a binding a g r e e m e n t with an
extractor
(a) in respect of the e x t r a c t o r ' s mineral resource right; or
(b) in anticipation of the extractor acquiring a mineral resource right.
the currency of the R e p u b l i c by applying the spot rate, as defined in section 1 of the
I n c o m e Tax Act, on the date on which that a m o u n t w a s so received or accrued or
expenditure or loss w a s so incurred.
Transitional credits
16. (1) T h e r e must be d e d u c t e d from the royalty p a y a b l e in respect of a mineral
resource the a m o u n t of any lease, royalty or similar p a y m e n t to the State in respect of
that mineral resource in t e r m s of any conditions i m p o s e d p u r s u a n t to the laws applicable
in respect of an old order right or O P 2 6 right m e n t i o n e d in S c h e d u l e II of the Mineral
and P e t r o l e u m R e s o u r c e s D e v e l o p m e n t Act, as consideration for the r e m o v a l or disposal
of a mineral or p e t r o l e u m .
(2) N o deduction is allowed in terms of subsection (1) in respect of any lease
m e n t i o n e d in item 9(7) of Schedule II to the M i n e r a l and Petroleum R e s o u r c e s
D e v e l o p m e n t Act.
(3) T h e a m o u n t to be d e d u c t e d in terms of subsection (1) must not exceed the royalty
m e n t i o n e d in that subsection.
Act b i n d i n g o n State a n d a p p l i c a t i o n o f o t h e r l a w s
17. T h i s Act binds the State, and n o provision in any other law is c o n s t r u e d as
applying or referring to this royalty unless the royalty is specifically m e n t i o n e d in that
provision.
S h o r t title a n d c o m m e n c e m e n t
18. (1) T h i s Act is called the Mineral and P e t r o l e u m R e s o u r c e s Royalty Act, 2 0 0 8 .
(2) T h i s Act c o m e s into operation on 1 May 2 0 0 9 and applies in respect of a mineral
resource transferred on or after that date.
SCHEDULE 1
REFINED CONDITION OF MINERAL RESOURCES
Mineral resource
name
Refined condition
Cobalt
Copper
Copper is refined once processed into copper metal slabs, blister cop
per or cathode copper of at least 99.0 % purity.
Germanium
Gold
Lead
Lithium
Mercury
99.9% purity
Platinum Group
Metals (iridium,
palladium, platinum,
rhodium, ruthenium
and osmium)
Molybdenum
Silicon
98.5% Si
Silver
Talc-
Zinc
Zinc is refined once processed into zinc metal, plates or slabs con
taining at least 98.5 % pure zinc.
Mineral resource
name
Refined condition
At inlet of refinery
Gas
At inlet of refinery
SCHEDULE 2
UNREFINED CONDITION OF MINERAL RESOURCES
Mineral resource
name
Unrefined condition
Aggregates
Bulk
Antimony
Barite
Beryllium
Bulk
Cobalt
7% Co in a polymineralic matte
Copper
20% to 30% Cu
Diamond
Rough Diamonds
Dimension stone:
Granite, Sandstone,
Slate. Shale, Gneiss.
Marble
Bulk
Fluorspar
80% concentrate
Graphite
Iron ore
61 % to 64% Fe content
Lead
Limestone
Manganese
Mica
48% concentrate
Mineral Sand
(Titanium)
llmenite
Rutile
Zircon
Nickel
1.4% Ni content
Mineral resource
name
Unrefined condition
Niobium
45% N i 0 in concentrate
Platinum Group
Metals (iridium,
palladium, platinum,
rhodium, ruthenium
and osmium)
Sand
Bulk
Silver
Tantalum
Tin
Tungsten ( C a W 0 )
and Wolram
Uranium
Vanadium
27% Zn in concentrate