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  • Proposed considerations in respect of mining capital expenditure

Proposed considerations in respect of mining capital expenditure

27 February 2020

Louis van Manen, Tax Director with input from Rowan Pretorius, Associate Director, Jwalane Mooko, Tax consultant & Mandla Kubeka, Senior Tax Manager

The judgement handed down in the SCA case ‘Benhaus Mining (Pty) Ltd v CIR’, arguably changed the tax landscape for contract miners.  

The court found that a contract miner would be entitled to claim the deductions and benefits conferred by sections 15(a) and 36(7C) of the ITA in respect of mining capital expenditure to a mining contractor. This dispensation was previously thought to be reserved only for mining taxpayers directly deriving income from the sale of extracted minerals.

Sub-contractors were not regarded as deriving mining income as they were not:

  • the holders of mining rights;
  • do not mine for their own account, but are contracted to “win minerals from the soil”; and
  • are remunerated for services rendered.

Due to the mismatch between the current legislation and the SCA judgement it comes as no surprise that the definition of ‘mining and mining operations’ and the related provisions dealing with allowable mining capital expenditure are to be reviewed.

We can only assume the outcome will dampen the short-lived elation experienced by contract miners following the SCA judgement.

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