Mining Tax and Royalty Tax

Resources though no longer the biggest contributor to the economy of South Africa they still play a significant role, mining tax plays a crucial role in South African fiscus. The determination of mining tax is however unique and requires special skills. Changes in legislation and court decisions increase the tax risks that mining entities are facing in mining environment. For instance, the tax treatment of successful and unsuccessful exploration expenditure poses challenges in as far as interpretation of legislation and court decisions are concerned: Any mining capital expenditure recorded as part of assets under construction are treated differently from other capital expenditure and therefore the tracking of these expenses becomes not only necessary but also essential in the correct determination of the mining current and deferred taxes.

Our procedures addressing risks related to mining tax are designed to ensure that:

  • Proper provision is made of mining tax to be paid to revenue authorities ; and
  • The current and deferred tax are fairly presented or disclosed in accordance with accounting standards read with relevant tax legislation.

Furthermore, compliance with legislation that regulates the imposition and calculation of royalties is very important. To ensure that the correct amount of royalties is paid or provided for, we perform procedures that include among others:

  • Review of controls relating to compliance with legislation that regulates the imposition and calculation of royalties;
  • Review calculation of royalties provided by management; and
  • Re-perform the calculation of royalties’ payable based on facts and relevant legislation.