And, finally, we see a move in the “right” direction.

Following the Benhaus case, there has been a lot of uncertainty regarding the ability of contract miners to access the benefits offered to mining companies conducting mining operations and whether such contract miners are permitted to claim the capital expenditure allowances offered to mining companies.

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The tax treatment of contract miners has been a topic of debate for a while and was included in the Davis Tax Committee in its Second and Final Report on Hard-Rock Mining during 2017 (DTC Report).

The Annexure C proposals to the 2020/21 Budget now recommend that National Treasury considers these challenges in further detail with possible amendments to the capital expenditure regime contained in section 36(11) of the Income Tax Act. 

Should we see amendments in this regard, this will probably be the first notable amendments to the mining tax provisions following the issuance of the DTC Report.

We are also seeing a proposal that the ring-fencing provisions be reconsidered and possibly restructured. Ring-fencing provisions generally apply to a mining company with separate mines, in terms of which the tax position needs to be determined for every mine with limited scope for offsetting of unredeemed capital expenditure between mines.

For example, these provisions provide specifically that capital expenditure of one mine may not be off-set against the taxable mining income from another profitable mine. Possible relaxation of these provisions will be welcomed by industry.

By Adéle de Jager, executive for Tax at Bowmans