During the past year there have been some interesting developments in the tax space in South Africa. One of the industries that has certainly not escaped SARS’ focus, is the mining industry. Although one of the biggest contributors to the country’s economy, it is an industry that seems to be regarded as not contributing enough to the tax base.

Recently the industry has been subjected to numerous queries and disputes by SARS on the claiming of diesel usage where SARS is not refunding the diesel claims submitted by taxpayers. We saw two critical diesel refund judgments from the High Court in 2019.

Mineral royalties and contract mining are other areas where we have seen disputes between SARS and taxpayers resulting in court judgements that significantly impact the tax landscape.   

Industry forums are likely to approach SARS to try and discuss the challenges and possible solutions to allow mining companies to continue trading in a manner that allows for financial sustainability and certainty.

Various recommendations were made by the Davis Tax Committee in its Second and Final Report on Hard-Rock Mining during 2017. To date, taxpayers have not seen any of these recommendations being actioned or considered for further consultation.  In addition, it is important that the strain on the mining industry from the diesel refund disputes is addressed, and legislative changes could mitigate these issues.   

Whether the 2020 Budget Speech will provide taxpayers in the mining sector clarity on the tax challenges facing industry, is to be seen.

Uncertainty on contentious tax issues and ongoing/ unsettled tax disputes raise concerns for potential investors and foreign direct investment in South Africa’s mining sector.