Background: Structure of Mineral Royalty Tax Regime.
As is the case for many African nations, South Africa’s economic growth is largely driven by industries such as mining, making it imperative for the government to foster the development of this essential sector. Mining plays a crucial role in stimulating economic expansion and serves as a fundamental pillar of a thriving society, particularly in developing countries.
However, the sector faces numerous challenges, one of which is the intricate nature of tax administration, characterized by complex tax regulations. To this end, compliance with royalty tax obligation continues to become a crucial component the tax risk management strategy for mining businesses, and a top priority for every stakeholder.
Generally, a company operating in South Africa is subject to a corporate income tax rate of 27% on its taxable income. However, companies involved in the mining sector are exposed to additional tax obligations beyond the ordinary corporate taxation. One of the most significant of these is the royalty tax, which is imposed under the Mineral and Petroleum Resources Royalty Act, 2008 (MPRRA).
(when can taxpayers rely on it to challenge additional assessments).
South African Revenue Service (SARS) is, in terms of section 92 of the Tax Administration Act (the TAA), empowered to raise additional assessments where it is, at any time, satisfied that an assessment does not reflect the correct application of a tax Act to the prejudice of SARS or the fiscus.
To protect the taxpayers’ right to tax finality, SARS is prohibited from raising additional assessment more than three years after date of original assessment in case of assessment by SARS (i.e. income tax assessment) or five years after date of original assessment in case of self-assessment (i.e. VAT) (section 99(1). This prohibition is generally referred to as ‘prescription’ or statutory immunity. There are instances where SARS is entitled to lift the proverbial veil of prescription. The article discusses the requirements that must be met by SARS before raising additional assessments on tax period(s) that has prescribed. It is imperative that the taxpayers are aware of these requirements to equip themselves with the defence of prescription in the event that SARS raises additional assessment on a tax period that has prescribed.
In terms of section 99(2)(a), SARS is, in case of assessment by SARS, entitled raise additional assessment on prescribed assessment if full amount of tax chargeable was not assessed due to fraud, misrepresentation or nondisclosure of material facts. In case of self-assessment, the full amount was not assessed due to fraud, intentional or negligent misrepresentation (section 99(2)(b)).
Section 15(a) read with section 36 of the Income Tax Act, No. 58 of 1962 (“the Act”) provides taxpayers who derive income from carrying on mining operations with the benefit of immediately claiming a deduction from taxable income, capital expenditure incurred during any year of assessment.
Thus, the deduction is claimed upfront and is not claimed over a certain period of time. This special deduction is Government’s way of incentivising mining companies as the sector is crucial to the South African economy and often faces challenges. Ordinarily, costs incurred by taxpayers to purchase capital assets would be capital in nature and therefore not deductible, however since mining companies invest greatly in mining equipment, section 15(a) read together with section 36 provides that such costs would be deductible for tax purposes.
In a recent court case Sishen Iron Ore Company (Pty) Ltd v CSARS (550/2023) [2025] , Sishen Iron Ore Company (‘’Taxpayer’’) incurred relocation costs in connection with their mining operations and sought to deduct such costs in terms of section 15(a) read with section 36 of the Act and alternatively in terms of section 11(a) of the Act.
2025 Tax Return Submission
The South African Revenue Service (SARS) has announced that the 2025 Tax Filing Season will run from 7 July to 20 October 2025 for non-provisional taxpayers, and from 21 July 2025 to 19 January 2026 for provisional taxpayers and trusts. SARS will automatically assess a large segment of taxpayers with simple tax affairs between 7 and 20 July 2025, using third-party data from employers, medical aids, and financial institutions. These taxpayers will receive notifications via SMS or email and are only required to take action if they identify incorrect or incomplete information in their assessments. Refunds will be processed within 72 business hours for verified information, and any amounts due must be paid through SARS’s digital platforms.
