Author: admin_kmos

Section 4 (MPRA) – Royalty formulae

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4       Royalty formulae

(1)     The percentage mentioned in section 3(1) is-

0.5 + [earnings before interest and taxes/(gross sales in respect of refined mineral resources x 12.5)] x 100.

(1A)   The percentage mentioned in section 3(1A) is-

2 + [earnings before interest and taxes/(gross sales in respect of refined mineral resources × 12.5)] × 100.

[Subsection (1A) inserted section 55(1)(a) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of years of assessment commencing on or after that date]

(2)     The percentage mentioned in section 3(2) is-

0.5 + [earnings before interest and taxes/(gross sales in respect of unrefined mineral resources x 9)] x 100.

(3)

(a)     The percentage determined in terms of subsections (1) and (1A) must not exceed 5 per cent.

[Paragraph (a) substituted section 55(1)(b) of Act 17 of 2023 with effect from 1 January, 2024 and applicable in respect of years of assessment commencing on or after that date]

(b)     The percentage determined in terms of subsection (2) must not exceed 7 per cent.

Section 3 (MPRA) – Determination of royalty

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3.       Determination of royalty

(1)     The royalty mentioned in section 2 in respect of the transfer of a refined mineral resource, other than oil and gas, is determined by multiplying the gross sales of the extractor in respect of that mineral resource during the year of assessment by the percentage determined in accordance with the formula in section 4(1).

[Subsection (1) substituted by section 54(1) of Act 17 of 2023 with effect from 1 January 2024 and applicable in respect of years of assessment commencing on or after that date]

(1A)  The royalty mentioned in section 2 in respect of the transfer of a refined mineral resource, that is oil and gas, is determined by multiplying the gross sales of the extractor in respect of that mineral resource during the year of assessment by the percentage determined in accordance with the formula in section 4(1A).

[Subsection (1A) inserted by section 54(1) of Act 17 of 2023 with effect from 1 January 2024 and applicable in respect of years of assessment commencing on or after that date]

(2)     The royalty mentioned in section 2 in respect of the transfer of an unrefined mineral resource is determined by multiplying the gross sales of the extractor in respect of that mineral resource during the year of assessment-

(a)     by the percentage determined in accordance with the formula in section 4(2); or

(b)     by the percentage determined in accordance with the formula as the Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, 1999 (Act 1 of 1999) effective on a date mentioned in that announcement.

[Subsection (2) substituted by section 92(a) of Act 15 of 2016]

(3)     If the Minister makes an announcement contemplated in subsection (2)(b), that percentage determined in accordance with the formula comes into effect on the date determined by the Minister in that announcement and continues to apply for a period of 12 months from that date subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Subsection (3) added by section 92(b) of Act 15 of 2016]

Section 2 (MPRA) – Imposition of royalty

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2.   Imposition of royalty


A person must pay a royalty for the benefit of the National Revenue Fund in respect of the transfer of a mineral resource extracted from within the Republic.

[Section  2 substituted by section 131(1) of Act 7 of 2010 deemed effective on 1 March, 2010 and applicable in respect of mineral resources transferred on or after that date]

Section 18 (MPRA) – Short title and commencement

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18     Short title and commencement


(1)     This Act is called the Mineral and Petroleum Resources Royalty Act, 2008.


(2)     This Act comes into operation—


(a)     in respect of section 1, on 1 November 2009;


(b)     in respect of sections 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 15, 16 and 17, and Schedules 1 and 2, on 1 March 2010 and applies in respect of a mineral resource transferred on or after that date; and


(c)     in respect of sections 13 and 14, on 1 November 2009 and applies in respect of a mineral resource transferred on or after 1 March 2010.

[Subsection (2) substituted by section 102(1) of Act 17 of 2009 effective on 1 November, 2009 to the extent that it relates to paragraph (a); effective on 1 March, 2010 to the extent that it relates to paragraph (b); and effective on 1 November, 2009 and applicable in respect of a mineral resource transferred on or after 1 March, 2010 to the extent that it relates to paragraph (c)]

Section 16 (MPRA) – Transitional credits

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16    Transitional credits


(1)     There must be deducted from the royalty payable in respect of a mineral resource the amount of any lease, royalty or similar payment to the State in respect of that mineral resource in terms of any conditions imposed pursuant to the laws applicable in respect of an old order right or OP26 right mentioned in Schedule II of the Mineral and Petroleum Resources Development Act, as consideration for the removal or disposal of a mineral or petroleum.


(2)     No deduction is allowed in terms of subsection (1) in respect of any lease mentioned in item 9(7) of Schedule II to the Mineral and Petroleum Resources Development Act.


(3)     The amount to be deducted in terms of subsection (1) must not exceed the royalty mentioned in that subsection.

Section 15 (MPRA) – Foreign currency

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15    Foreign currency


Any amount received by or accrued to, or expenditure or loss incurred by—


(a)     an oil and gas company as defined in paragraph 1 of the Tenth Schedule to the Income Tax Act in any currency other than the currency of the Republic must be translated to the currency of the Republic by applying the average exchange rate for the year in which that amount was so received or accrued or expenditure or loss was so incurred;


(b)     an extractor in any currency other than the currency of the Republic must be translated to the currency of the Republic by applying the spot rate, as defined in section 1 of the Income Tax Act, on the date on which that amount was so received or accrued or expenditure or loss was so incurred.

[Section 15 substituted by section 152(1) of Act 24 of 2011, deemed effective on 1 March 2010 and applies in respect of a mineral resource transferred on or after that date]

Section 14 (MPRA) – Terms and conditions of fiscal stability agreements

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14 Terms and conditions of fiscal stability agreements

 

(1)     An amendment of section 4 has no force and effect in respect of an extractor that is party to an agreement contemplated in section 13(1) if the amendment has the effect that the extractor becomes subject to a royalty which is greater than the royalty to which the extractor would otherwise have been subject.

 

(2)     If the State fails to comply with the terms of an agreement contemplated in section 13(1) and the failure has a material adverse economic impact on the determination of the royalty payable by the extractor that is party to that agreement, the extractor is entitled to compensation in respect of the increase in the royalty caused by the failure (and interest at the prescribed rate calculated on the compensation from the date of the failure) or to an alternative remedy that eliminates the full impact of the failure.

Section 13 (MPRA) – Conclusion of fiscal stability agreements

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13     Conclusion of fiscal stability agreements


(1)     The Minister of Finance may conclude a binding agreement with an extractor—


(a)     in respect of the extractor’s mineral resource right; or


(b)     in anticipation of the extractor acquiring a mineral resource right,


that guarantees that the terms and conditions contemplated in section 14 apply in respect of the right for as long as the extractor holds the right (and for all participating interests subsequently held by the extractor in respect of the right).


(2)     A binding agreement relating to the anticipated acquisition of a mineral resource right contemplated in subsection (1)(b) has no force and effect unless the mineral resource right is granted within one year after the date on which the Minister of Finance concludes the binding agreement.


(3)     If an extractor disposes of a prospecting right or an exploration right granted under the Mineral and Petroleum Resources Development Act to another person, and the right is subject to a binding agreement mentioned in subsection (1) on the date of the disposal, the extractor may assign all the rights held by the extractor under the agreement to the other person.


(4)     If an extractor disposes of a mining right or a production right granted under the Mineral and Petroleum Resources Development Act to another person, and the right is subject to a binding agreement mentioned in subsection (1) on the date of the disposal, the extractor may assign all the rights held by the extractor under the agreement to the other person, if both the extractor and the other person form part of the same group of companies (as defined in section 1 of the Income Tax Act) on the date of the disposal.


(5)     An extractor that concludes a binding agreement mentioned in subsection (1) may unilaterally terminate the agreement at any time effective on the day after the last day of the year of assessment during which the extractor terminated the agreement.


(6)     For purposes of this section—


(a)     a prospecting right, a renewal of the prospecting right and an initial mining right converted from a prospecting right or renewal thereof held by an extractor; and


(b)     an exploration right, a renewal of the exploration right and an initial production right converted from an exploration right or renewal thereof held by an extractor,


are, to the extent that those rights relate to the same geographical area, all deemed to be one and the same mineral resource right in the hands of the extractor.


(7)     The powers conferred and the duties imposed upon the Minister of Finance by the provisions of this section may be exercised or performed by the Minister personally or delegated by the Minister to the Director-General of the National Treasury and the Director-General may in turn delegate the powers and duties so delegated to him or her to any officer or person under his or her control, direction or supervision.


(8)     For purposes of this section “mineral resource right” means a prospecting right, exploration right, mining right or production right granted pursuant to the Mineral and Petroleum Resources Development Act, and includes any lease or sublease mentioned in section 11 of that Act in respect of such right.

Section 12 (MPRA) – General anti-avoidance rule

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12     General anti-avoidance rule

 

(1)     Notwithstanding anything to the contrary in this Act, if the Commissioner is satisfied that a disposal, transfer, operation, scheme or understanding (whether entered into or carried out before or after the commencement of this Act)—

 

(a)     has been entered into or carried out, which has the effect of avoiding or postponing liability for the royalty, or of reducing the amount thereof;

 

(b)     having regard to the circumstances under which the disposal, transfer, operation, scheme or understanding was entered into or carried out—

 

(i)      was entered into or carried out—

 

(aa)   in the case of a disposal, transfer, operation, scheme or understanding in the context of business, in a manner which would not normally be employed for bona fide business purposes, other than the obtaining of a royalty benefit; and

 

(bb)   in the case of any other disposal, transfer, operation, scheme or understanding not falling within the provisions of item (aa), by means or in a manner which would not normally be employed in the entering into or carrying out of a disposal, transfer, operation, scheme or understanding of the nature of the disposal, transfer, operation, scheme or understanding in question; or

 

(ii)      has created rights or obligations which would not normally be created between persons dealing at arm’s length under a disposal, transfer, operation, scheme or understanding of the nature of the disposal, transfer, operation, scheme or understanding in question; and

 

(c)     was entered into or carried out solely or mainly for the purposes of obtaining a royalty benefit,

 

the Commissioner must determine the liability for the royalty, and the amount thereof, as if the disposal, transfer, operation, scheme, or understanding had not been entered into or carried out, or in such manner as the Commissioner in the circumstances deems appropriate for the prevention or diminution of avoidance, postponement or reduction.

 

(2)     A decision of the Commissioner under subsection (1) is subject to objection and appeal in accordance with Chapter 9 of the Tax Administration Act, 2011 (Act 28 of 2011), and whenever in proceedings relating thereto it is proved that the disposal, transfer, operation, scheme or understanding in question would result in the avoidance or postponement of liability for the royalty, or in the reduction of the amount thereof, it is presumed, until the contrary is proved, in the case of any such disposal, transfer, operation, scheme or understanding, that it was entered into or carried out solely or mainly for the purposes of the avoidance or the postponement of such liability, or the reduction of the amount of such liability.

[Subsection (2) substituted by section 27 of Act 39 of 2013]

 

(3)     For purposes of this section, “royalty benefit” includes any avoidance, postponement or reduction of the liability for payment of the royalty mentioned in section 2.