Modern Mining March 2020

CONTRACT MINING

Bowmans, an amendment is likely to take the form of the cur- rent mining tax dispensations (to which mining companies are entitled) to be extended to con- tract miners, with more clarity as to whether the contract min- ing industry will be able to rely on the tax relief and benefits offered in section 36(11) of the Income Tax Act. “The Benhaus case confirmed the uncertainty for the contract mining industry and the fact that taxpayers need certainty,” says De Jager. Possible considerations What will be the possible con- siderations for the proposed

rights holder was entitled to claim the allowance. The SCA overturned the Tax Court’s judgment in the Benhaus case. The Tax Court had, in a separate judgment handed down prior to the Benhaus Mining judgment, decided that the contract miner could not claim the capital expenditure allowance,” explains Botha. Louis van Manen, tax director at BDO in South Africa, says the contention is that mining companies are generally not limited to a fixed annual percent- age or write off period of capital expenditure for tax purposes. The deduction thereof is rather limited to taxable income on an annual basis. “In contrast, mining contractors in general were deducting capital expenditure at legislated or SARS prescribed fixed percentages, irrespective of taxable income levels. Contract miners were accord- ingly taxed like most other non-mining companies,” explains Van Manen. With mining companies having to invest signifi- cantly pre-production, Van Manen says the mining tax regime ensured they would not be burdened with tax cash outflows once they entered the production phase but only once their capital investments started paying off. “We hope that the amendments will bring clar- ity on who will be able to apply for the mining tax regime,” says Van Manen. According to Adéle de Jager, executive, tax at

amendments? Are the amendments likely to bring further joy to the contract mining fraternity or will they dampen the short-lived excitement? “In my view, the amendments are likely to be posi- tive for the contract mining industry but it will require careful drafting and a proper consultation process before enactment. I would also think that not only the provisions of section 36(11) should be considered, but those relevant to mining rehabilitation may also require consideration,” says De Jager.

Louis van Manen, tax director at BDO in South Africa.

Following the Benhaus case, there has been uncertainty regarding the ability of contract miners to access the benefits offered to mining companies.

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March 2020  MODERN MINING  39