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3/19/2016 Mining taxes for South Africa

Mining taxes for South Africa


South Africa applies a res idence bas is of taxation. South African res idents are taxed on their worldwide incom e.
Non-res idents are taxed on incom e received by them or accruing to them from a South African s ource or deem ed
South African s ource, s ubject to tax treaty relief if available.

The South African corporate tax rate is 28%. All com panies are taxed at 28% with the exception of gold m ining
com panies who are taxed in accordance with a s pecific form ula bas ed on m ining taxable incom e and m ining
incom e.

2010 s aw the introduction of m ining royalties in South Africa. Mining royalties are calculated and charged on the
trans fer of m inerals . All m ineral rights ves t with the State as cus todian of m ineral res ources on behalf of South
African citizens . Through the im plem entation of the m ining royalty regim e, the State (as cus todian) is
com pens ated for the country's perm anent los s of non renewable res ources . South Africa has opted for a m ineral
and petroleum royalty regim e that is bas ed on value (vs volum e) and is calculated bas ed on variable royalty
percentage rates bas ed on whether the m ineral is refined or unrefined.

A com prehens ive review of the appropriatenes s of the current m ining tax regim e is currently under way.

Gert Meiring - Partner - m ining tax


+27117975506

Corporate Income Tax (CIT)

1: 28.00% [387, 389, 390]


Top rate of CIT 2: [389, 390]
3: [390]

Level at which applied Federal

Tax imposed on excess profits Yes [388]

Rates of tax amortization

Ore assets amortization Not deductible

Lands/Improvements amortization 10.00% - 100.00% [391]

Buildings amortization 10.00% - 100.00% [392]

Plant and Machinery amortization 100.00%

Tailing liners amortization 100.00%

Working/construction in progress amortization 100.00% [393]

Restriction on use of tax losses Not applicable [394]

Special allowances/contracts Yes [395]

Mineral taxes

Mineral tax name Mineral and Petroleum Resources Royalty

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3/19/2016 Mining taxes for South Africa

Level Federal

Formula based percentage applied to adjusted gross


Basis
sales [396]

Copper 0.00% [397]

Gold 0.50% - 5.00% [398]

Iron ore 0.50% - 7.00% [399]

Coal 0.50% - 7.00% [400]

Deductible in CIT calculation Yes

Other mineral taxes

Notable changes Yes [401]

Other taxes and payments

Name of other taxes [402]

Basic

Rate

VAT charged on exports Yes [403]

Average time for VAT refund Within 3 months

1: Licence fees [404]


2: No
Any other payments
3: No
4: No

Tax on exports

Ore extracted [405]

Processed ore [406]

Refined metal [407]

Other [408]

Withholding tax

Dividends 15.00% [409]

Interest 15.00% [410]

Royalties 12.00% [411]

Service fees 15.00% [412]

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Other comments

Fiscal stabiliity agreements Yes - by negotiation [413]

Social contributions Yes - required [414]

Additional in-country information

Past increases (since 2008) Yes

Government considering future increases Yes

Notes
387. All com panies are taxed 28% except for gold m ining com panies which are taxed on a percentage
determ ined according to a form ula bas ed on m ining taxable incom e and m ining incom e. ↩

388. The rate for gold m ining com panies is determ ined by a form ula linked to profits . The rate is determ ined in
accordance with the following form ula: 34 - 170/x, x = ratio expres s ed as a percentage which the taxable incom e
derived from m ining for gold bears to the incom e derived from m ining for gold. ↩

389. No ↩

390. Not applicable ↩

391. Land is not deductible. Im provem ents would be deductible depending on the type of im provem ents . ↩

392. This would depend on the type of building. It could range between 10% and 100%. ↩

393. Expenditure incurred by a taxpayer on pros pecting operations in an area within the Republic is deductible
from incom e earned from m ining operations . Expenditure incurred on developm ent, general adm inis tration and
m anagem ent prior to the com m encem ent of production or during any period of non-production, is deductible from
incom e derived by that taxpayer's m ining operations to the extent this deduction does not exceed taxable incom e
in res pect of s uch m ine. Any am ount which exceeds the taxable incom e is carried forward and deem ed to be an
am ount of capital expenditure incurred in the s ucceeding year for the m ine to which it relates . Lim ited upliftm ent
of the ring-fence between m ines is available in certain ins tances . ↩

394. Tax los s es carried forward do not expire as long as the taxpayer is trading. ↩

395. Section 15(a) together with s ection 36 of the Act achieve the outcom e of allowing a taxpayer to deduct from
incom e derived by that taxpayer's m ining operations , the full am ount of capital expenditure incurred in relation to
any m ine, to the extent this deduction does not exceed taxable incom e in res pect of s uch m ine. Any am ount of
capital expenditure which exceeds the taxable incom e is carried forward and deem ed to be an am ount of capital
expenditure incurred in the s ucceeding year for the m ine to which it relates . Lim ited upliftm ent of the ring-fence
between m ines is available in certain ins tances . The above applies to all item s of capital expenditure us ed for
s haft s inking and m ine equipm ent as well as developm ent, general adm inis tration and m anagem ent of a m ine
prior to the com m encem ent of production or during any period of non-production. Acquis ition, erection,
cons truction, im provem ent or laying out of hous ing and furniture for em ployees , infras tructure for res idential
areas developed for s ale to em ployees , recreational buildings and facilities owned and operated by the taxpayer
m ainly for us e of the by em ployees and railway or s im ilar function for trans port of m inerals from m ine to neares t
public trans port s ys tem or outlet will all be deem ed to be payable in 10 equal annual ins talm ents . (Partial annual
redem ption as s ets ). Motor vehicles for private or partly private us e of em ployees will be deem ed to be payable in
5 equal annual ins talm ents . (Partial annual redem ption as s ets ). In res pect of the dis pos al of low-cos t res idential
unit to em ployees 10 percent of the am ount owed to the taxpayer at the end of the year of as s es s m ent is included
in capital expenditre. Expenditure (excluding rehabilitation and infras tructure) incurred in term s of a m ining right is
included in capital expenditure. In addition to the above, certain qualifying gold m ines are entitled to an additional
allowance calculated on their capital expenditure balance. Thes e allowances are as follows : - A pos t - 1973 gold
m ine - 10% - A pos t - 1990 gold m ine - 12% ↩

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396. The Mineral and Petroleum Res ources Royalty Act (MPRRA) applies variable royalty percentage rates to
adjus ted gros s s ales . The royalty percentage rates are bas ed on whether the m ineral is refined or unrefined. The
royalty liability is equal to the tax bas e (gros s s ales ) m ultiplied by the royalty percentage rate. Unrefined m ineral
res ources are m ineral res ources that have undergone lim ited beneficiation and are lis ted in Schedule 2 to the
MPRRA. The royalty percentage for unrefined m inerals is : Y(u) = 0.5 + {EBIT / Gros s Sales x 9)} x 100 Where: Y(u)
= royalty percentage unrefined; EBIT = Earnings before interes t and taxes (but EBIT can never go below zero) The
m inim um royalty percentage in the cas e of unrefined m inerals is 0.5% and the m axim um royalty percentage is
7%. Refined m ineral res ources are m ineral res ources that have undergone a com prehens ive level of
beneficiation and are lis ted in Schedule 1 to the MPRRA. The royalty percentage for refined m inerals is : Y(r) = 0.5
+ {EBIT / Gros s s ale x 12.5)} x 100 Where: Y(r) = Royalty percentage refined; EBIT = Earnings before interes t and
taxes (but EBIT can never go below zero) The royalty percentage in the cas e of refined m inerals is 0.5% and the
m axim um royalty percentage is 5%. ↩

397. Refined or unrefined m ineral. ↩

398. Refined m ineral. ↩

399. Unrefined m ineral. ↩

400. Unrefined m ineral. ↩

401. The Davis Tax Com m ittee (DTC) was es tablis hed by the Minis ter of Finance in 2013 to conduct a
com prehens ive review of the contribution South Africa's taxation s ys tem m akes to South Africa's growth and
developm ent within the context of the National Developm ent Plan. The appropriatenes s of the current m ining tax
regim e is one of the as pects of the South African taxation s ys tem that is receiving s pecific attention from the DTC,
taking account of: i) the agreem ent between Governm ent, Labour and Bus ines s to ens ure that the m ining s ector
contributes to growth and job creation, rem ains a com petitive inves tm ent propos ition, and all role players
contribute to better working and living conditions ; and ii) the challenges facing the m ining s ector, including low
com m odity prices , ris ing cos ts , falling outputs and declining m argins , as well as to its current contribution to tax
revenues . Subm is s ions are due on 31 July 2014. ↩

402. No other s ignificant taxes or levies are charged on the extraction of m inerals . ↩

403. VAT is levied at the zero rate provided that all required docum entation is in place. ↩

404. There is no s tandard bas is and rate. The am ount would vary as negotiated. ↩

405. No export duties charged ↩

406. No export duties charged ↩

407. No export duties charged ↩

408. None ↩

409. Double tax agreem ents m ay reduce the rate of withholding tax. ↩

410. This com es into effect on 1 January 2015. Double tax agreem ents m ay reduce the rate of withholding tax. ↩

411. The 12% rate is currently applicable. This will increas e to 15% with effect from 1 January 2015. Double tax
agreem ents m ay reduce the rate of withholding tax. ↩

412. This com es into effect on 1 January 2016. Double tax agreem ents m ay reduce the rate of withholding tax. ↩

413. Royalty legis lation provides an extractor with an option to obtain a long-term fis cal s tability in res pect of the
extractor's m ining royalty liability calculations . In general, the purpos e of a fis cal s tability agreem ent is to ens ure
that an extractor's inves tors have certainty with res pect to the royalty regim e (i.e. law). ↩

414. Thes e cos ts are typically incurred in term s of the m ining charter. ↩

Energy, utilities and mining

Oil a n d g a s Of further interest

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