Articles
- Administration of estates
- Administrative law
- Alternative dispute resolution
- Commercial
- Competition
- Construction
- Consumer legislation
- Electronic communications
- Employment
- Energy
- Entertainment, Media & Sport
- Environmental
- Family law
- Financial
- Franchising
- India
- Insolvency and business rescue
- Insurance
- Intellectual property
- Litigation
- Pension
- Personal injury
- Pro bono
- Property
- Tax and exchange control
Mineral and Petroleum Resources Royalty Bill
Business Law & Tax Review March 2008/CLASA Incorporate Winter 2008
By Maryann Middleton
The third draft of the Mineral and Petroleum Resources Royalty Bill was published for comment on 6 December 2007, together with the Mineral and Petroleum Resources Royalty (Administration) Bill.
In terms of the bill every extractor will become liable to pay royalties to the State on minerals mined within the Republic of South Africa, including its territorial waters. An extractor is defined as any person or entity that mines or recovers a mineral resource (or has a mineral resource won or recovered on its behalf, as is the case where a third party is contracted to mine the mineral).
After promulgation all extractors will be obliged to register under the Act. There will be two assessment periods of each 6 months in each year.
The royalty will be calculated as:
earnings before interest, taxes, depreciation & amortisation
aggregate gross sales for the assessment preriod x12.5
x100
A negative rate will be deemed to be a zero rate.
Allowable deductions will include expenditure on processing the mineral beyond its initial readily saleable condition as associated with beneficiation as prescribed by the Minister of Finance, and costs of transportation to the extent that such costs are incurred after processing.
Non-deductible costs will include management fees, general overhead and administration costs, marketing, depreciation and interest.
Small mining businesses with gross sales of less than R5 million in the assessment period, and where the royalty would be less than R50 000, will be exempt from the royalty.
A number of anti-avoidance measures are incorporated into the bill.
The bill introduces a fiscal guarantee which empowers the Minister of Finance to enter into agreements with extractors for the duration of their mining rights which will stabilise the rate of royalty payable so that any subsequent legislative amendments which increase the royalty rate will not apply to that extractor.
Talk to a specialist
Consultant
011 775 6364
E-mail Maryann Middleton