Charlotte Mathews
6 November 2009
Johannesburg — MINING companies can start registering now for their obligation to pay tax under the Mining Royalties Act and are being urged to discuss with the South African Revenue Service (SARS) the details of how the act will apply to their particular operations.
The new tax becomes due from March 1.
The act, which was postponed for many years while government and industry haggled over the details, requires all entities recovering minerals in SA to pay royalties at a rate between 0,5% and 7% based on gross sales, less allowable deductions.
Accountancy firm BDO Spencer Steward partner Ursula van Eck said this was preferable to the original proposal that royalties be paid on turnover. But there remained some uncertainty in the details of the calculation and how it would affect unincorporated joint ventures, which are relatively common entities in mining but do not have to be registered for income tax.
KPMG corporate tax director Andries Myburgh said there were various problems with unincorporated joint ventures , which he believed would necessitate a change in the legislation. Because they were not liable to register for income tax, they had no "allowable deductions in terms of income tax" that they were entitled to subtract in their royalty calculation.
SARS spokesman Adrian Lackay said any entity operating as an unincorporated joint venture should discuss its registration and filing with SARS.
Although registration was simple, the practical application of the act would be more complex and SARS has been talking to large corporations in the past few months to help clarify the process before their first payments fall due, Lackay said.
Myburgh said the gross sales value was intended to be calculated "as close to the mine mouth as possible". For example a coal miner could estimate a calorific value on the mined product, rather than calculate a value after the coal was washed and sorted, which would be higher.
This was intended to encourage beneficiation.
Lackay said the act did not stipulate how to calculate gross expenditure related to extraction of minerals.
Penalties for underestimating the tax could be applied at SARS's discretion under the Mining Royalties Act, Lackay said.
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