FINANCE FORUM •
Since the release of the final report in 2016 , the following changes were introduced into the tax legislation impacting the mining industry : 1 . Infrastructure costs incurred in terms of the Social and Labour Plan were included in the definition of capital expenditure under section 36 ( 11 )( eA );
2 . Renewable energy incentive introduced in 2023 : An allowance to incentivise mining companies to reduce greenhouse gas emissions by investing in plant , machinery or equipment to generate electricity from alternate sources such as wind , solar energy , hydropower or biomass comprising organic wastes , landfill gas or plant and material . This incentive is only available for a limited period and provided that plant , equipment , machinery , utensils or articles were acquired and brought into use for the first time by such mining company for use in their trade on or after 1 March 2023 and before 1 March 2025 . The incentive will not be available to mining companies who invested in alternative electricity generation equipment before this period and will only be available until March 2025 . For mining companies in the pre-production or development phase who are likely to bring assets generating electricity into use after the sunset date of this incentive will not qualify for the incentive even if the investment was made within the qualifying period ;
3 . Updates were effected to the Mineral and Petroleum Royalty Act to clarify the calculation and payment of royalties including the deductibility of transport costs ; and
4 . The Carbon Tax Act in 2019 was introduced to regulate greenhouse gas emissions and to encourage the use of alternate renewable energy .
Based on the changes introduced , it is evident that not much has been done in this space to ensure that the legislation is aligned to the changes in the industry . Despite the contribution to revenue collections , mining companies continue to face challenges in respect of the use of capital expenditure incurred due to the ring-fencing provisions to assessed losses as well as the further limitations placed on the assessed loss regime in respect of non-mining income earned by mining companies . Mining companies are continuously faced with tax related audits challenging the classification of income earned from mining vs . non-mining activities as well as the deductibility of expenditure incurred by mining companies . The determination of income earned from mining and non-mining operations remains a contentious issue with the South African Revenue Authorities .
According to the Mining Global Market Report 3 , “ Governments worldwide are actively providing subsidies and encouraging foreign direct investments ( FDI ) in the mining industry . This support encompasses various forms , including investments from public finance institutions such as bilateral development banks and export credit agencies , fiscal support through budget allocations and tax exemptions , and investments via majority state-owned mining and utility companies .” 3
Simplifying the overall regulatory framework and changing the tax framework to align with the changes in the industry would incentivise foreign direct investment in South Africa . Examples of these changes could involve simplifying the process for obtaining mining licenses and permits , as well as reducing compliance costs , transformation incentives for mining companies as well as special learnership allowances for the mining industry . These changes could make mining companies more attractive to both foreign and local investors .
Concluding remarks The South African mining industry remains a major contributor to the economy , and it is essential that the tax legislation evolves to support its growth and sustainability . The DTC ' s reports highlighted the need for a tax system that supports economic growth , job creation , fiscal stability , the importance of maintaining a competitive tax regime to attract investment , and the need for special tax incentives to address the unique challenges faced by the mining industry .
Government should create a more conducive environment for investment , innovation , and sustainable development in the mining sector to ensure that the industry continues to contribute effectively to revenue growth and overall economic prosperity . •
References :
1 . First Interim Report on Mining , Davis Tax Committee , 2015 2 . Second and Final Report on Hard-Rock Mining , Davis Tax Commission ,
2016 3 . Mining Global Market Report , February 2024 , https :// www . researchandmarkets . com /
Introducing Althea Soobyah : Soobyah is an admitted attorney with more than 20 years ’ tax experience , a chartered tax advisor with SAIT and serves as a member of the National Governance Council at Forvis Mazars in South Africa . She joined Forvis Mazars as a director in Tax Consulting in May 2020 and is currently head of department
Althea Soobyah Partner at Forvis Mazars . for the Gauteng region . She focuses on all areas of corporate tax , including mining , tax restructuring , merger and acquisitions and tax dispute resolution . Previously employed by one of the big 4 accounting firms , Soobyah was involved with providing tax advisory services to clients across multiple sectors , tax and transfer pricing controversy matters . She also spent 14 years at the South African Revenue Service prior to joining consulting with a focus on corporate tax , mining tax , tax policy , dispute resolution , and legal interpretation among others .
The determination of income earned from mining and nonmining operations remains a contentious issue .
Supplied by www . africanmining . co . za African Mining Publication African Mining African Mining • January 2025 • 61