Category: Mineral and Petroleum Resources Royalty Act No. 28 of 2008

Section 6 (MPRA) – Gross sales

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6        Gross sales

 

(1)     Gross sales in respect of a refined mineral resource transferred—

 

(a)     as mentioned in paragraph (a) of the definition of “transfer” in section 1 in the condition specified for that mineral resource in Schedule 1 is the amount received or accrued during the year of assessment in respect of the transfer of that mineral resource;

 

(b)     as mentioned in paragraph (a) of the definition of “transfer” in section 1 in a condition other than that specified for that mineral resource in Schedule 1 is the amount that would have been received or accrued during the year of assessment in respect of the transfer of that mineral resource had that mineral resource been transferred in the condition specified in Schedule 1 for that mineral resource in terms of a transaction entered into at arm’s length; and

 

(c)     as mentioned in paragraph (c) of the definition of “transfer” in section 1 is the amount that would have been received or accrued during the year of assessment in respect of the transfer of that mineral resource had that mineral resource been transferred in the condition specified in Schedule 1 for that mineral resource in terms of a transaction entered into at arm’s length.

[Paragraph (c) substituted by section 95(1)(a) of Act 23 of 2018 effective on 1 January, 2019]

 

(2)     Gross sales in respect of an unrefined mineral resource transferred—

 

(a)     as mentioned in paragraph (a) of the definition of “transfer” in section 1 in the condition specified in Schedule 2 for that mineral resource is the amount received or accrued during the year of assessment in respect of the transfer of that mineral resource;

 

(b)     as mentioned in paragraph (a) of the definition of “transfer” in section 1 in a condition other than that specified for that mineral resource in Schedule 2 is the amount that would have been received or accrued during the year of assessment in respect of the transfer of that mineral resource had that mineral resource been transferred in the condition specified in Schedule 2 for that mineral resource in terms of a transaction entered into at arm’s length; and

 

(c)     as mentioned in paragraph (c) of the definition of “transfer” in section 1 is the amount that would have been received or accrued during the year of assessment in respect of the transfer of that mineral resource had that mineral resource been transferred in the condition specified in Schedule 2 for that mineral resource in terms of a transaction entered into at arm’s length.

[Paragraph (c) substituted by section 95(1)(b) of Act 23 of 2018 effective on 1 January, 2019]

 

(3)

 

(a)     For purposes of subsection (1), gross sales is determined after deducting any expenditure actually incurred in respect of, insurance and handling of a refined mineral resource after that mineral resource was refined to the condition specified in Schedule 1 for that mineral resource or any amount received or accrued to effect the disposal of that mineral resource.

[Paragraph (a) substituted by section 95(1)(c) of Act 23 of 2018 effective on 1 January, 2019]

 

(b)     For purposes of subsection (2), gross sales is determined after deducting any expenditure actually incurred in respect of transport, insurance and handling of an unrefined mineral resource after that mineral resource was brought to the condition specified in Schedule 2 for that mineral resource or any expenditure actually incurred in respect of transport, insurance and handling to effect the disposal of that mineral resource.

[Subsection (3) substituted by section 99(1) of Act 17 of 2009 effective on 1 March, 2010 and applicable in respect of a mineral resource transferred on or after that date. Paragraph (b) substituted by section 95(1)(c) of Act 23 of 2018 effective on 1 January, 2019]

 

(4)

 

(a)     If no amount can be quantified in respect of a refined mineral resource transferred as mentioned in subsection (1)(a), gross sales in respect of that transfer is the amount that would have been received or accrued during the year of assessment in respect of that transfer had that mineral resource been transferred in the condition specified in Schedule 1 for that mineral resource in terms of a transaction entered into at arm’s length.

 

(b)     If no amount can be quantified in respect of an unrefined mineral resource transferred as mentioned in subsection (2)(a), gross sales in respect of that transfer is the amount that would have been received or accrued during the year of assessment in respect of that transfer had that mineral resource been transferred in the condition specified in Schedule 2 for that mineral resource in terms of a transaction entered into at arm’s length.

 

(5)     The amount of gross sales in respect of the transfer of any mineral resource must be adjusted if the total amount received is—

 

(a)     more than the amount accrued, by including the difference between those amounts in the gross sales; or

 

(b)     less than the amount accrued, by subtracting the difference between those amounts when determining the gross sales.

[Subsection (5) added by section 133(1) of Act 7 of 2010 deemed effective on 1 March, 2010 and applicable in respect of a mineral resource transferred on or after that date]

Section 5 (MPRA) – Earnings before interest and taxes

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5       Earnings before interest and taxes

 

(1)     For purposes of the formula in section 4(1) and (1A), “earnings before interest and taxes” in respect of a year of assessment means the aggregate of-

 

(a)     the gross sales of the extractor during that year in respect of refined mineral resources; and

 

(b)     so much of the amount allowed to be deducted from income in terms of the Income Tax Act (whether in that year or a previous year of assessment) in respect of the use of assets, or expenditure incurred, in respect of mineral resources transferred on or after 1 March 2010 to win, recover and develop those mineral resources to the condition specified in Schedule 1, as is included in the income of the extractor during that year of assessment—

 

(i)       as a recoupment in terms of any provision of that Act; or

 

(ii)      in terms of paragraph (j) of the definition of “gross income” in section 1 of that Act,

[Paragraph (b) substituted by section 98(1)(a) of Act 17 of 2009 effective on 1 March, 2010 and applicable in respect of a mineral resource transferred on or after that date]

 

less any amount which in terms of that Act—

 

(i)      is deductible from the income of the extractor during any year of assessment in respect of assets used or expenditure incurred to win, recover and develop those refined mineral resources to the condition specified in Schedule 1 for those mineral resources; or

 

(ii)     would have been deductible from the income of the extractor during any year of assessment in respect of assets used or expenditure incurred to win, recover and develop those refined mineral resources had those mineral resources been developed to the condition specified in Schedule 1 for those mineral resources.

[Subsection (1) amended by section 98(1)(b) of Act 17 of 2009, substituted by section 132(1)(a) of Act 7 of 2010 and amended by section 56(1) of Act 17 of 2023 deemed effective on 1 January, 2024 and applicable in respect of years of assessment commencing on or after that date]

 

(2)     For purposes of the formula in section 4(2), “earnings before interest and taxes” in respect of a year of assessment means the aggregate of—

 

(a)     the gross sales of the extractor during that year in respect of unrefined mineral resources; and

 

(b)     so much of the amount allowed to be deducted from income in terms of the Income Tax Act (whether in that year or a previous year of assessment) in respect of the use of assets, or expenditure incurred, in respect of mineral resources transferred on or after 1 March 2010 to win, recover and develop those mineral resources to the condition specified in Schedule 2, as is included in the income of the extractor during that year of assessment—

 

(i)       as a recoupment in terms of any provision of that Act; or

 

(ii)      in terms of paragraph (j) of the definition of “gross income” in section 1 of that Act,

[Paragraph (b) substituted by section 98(1)(c) of Act 17 of 2009 effective on 1 March, 2010 and applicable in respect of a mineral resource transferred on or after that date]

 

less any amount which in terms of that Act—

 

(i)      is deductible from the income of the extractor during any year of assessment in respect of assets used or expenditure incurred to win, recover and develop those unrefined mineral resources to the condition specified in Schedule 2 for those mineral resources; or

 

(ii)     would have been deductible from the income of the extractor during any year of assessment in respect of assets used or expenditure incurred to win, recover and develop those unrefined mineral resources had those mineral resources been developed to the condition specified in Schedule 2 for those mineral resources.

[Subsection (2) amended by section 98(1)(d) of Act 17 of 2009 and by section 132(1)(b) of Act 7 of 2010 deemed effective on 1 March, 2010 and applicable in respect of a mineral resource transferred on or after that date]

 

(3)     For purposes of subsections (1) and (2), “earnings before interest and taxes” is determined without regard to—

 

(a)     any deduction in respect of a financial instrument as defined in section 1 of the Income Tax Act (other than an instrument that is an option contract, forward contract or other instrument the value of which is derived directly or indirectly with reference to mineral resources);

 

(b)     any deduction allowed in terms of section 11(a) of the Income Tax Act in respect of the royalty;

 

(c)             

 

(i)      in the case of mineral resources refined to the condition specified in Schedule 1 for those mineral resources, any deduction for expenditure incurred in respect of transport, insurance and handling of those refined mineral resources after those mineral resources were refined to that condition or any expenditure incurred in respect of transport, insurance and handling to effect the disposal of that mineral resource; or

 

(ii)     in the case of mineral resources brought to the condition specified in Schedule 2 for those mineral resources, any deduction for expenditure incurred in respect of transport, insurance and handling of those unrefined mineral resources after those mineral resources were brought to that condition or any expenditure incurred in respect of transport, insurance and handling to effect the disposal of that mineral resource;

[Paragraph (c) substituted by section 98(1)(e) of Act 17 of 2009 effective on 1 March, 2010 and applicable in respect of a mineral resource transferred on or after that date]

 

(d)     any balance of assessed loss mentioned in section 20(1)(a) of the Income Tax Act, unless the balance of assessed loss arises in respect of capital expenditure taken into account for purposes of paragraph 5(1) of the Tenth Schedule of the Income Tax Act;

 

(e)     any deduction allowed in terms of section 24I of the Income Tax Act other than a deduction in respect of the adjustment referred to in section 6(5); or

[Paragraph (e) substituted by section 132(1)(c) of Act 7 of 2010 and amended by section 184(1)(a) of Act 31 of 2013 effective on 1 March, 2014 and applicable in respect of a mineral resource transferred on or after that date]

 

(f)      any determination in respect of an impermissible tax avoidance arrangement contemplated in Part IIA of the Income Tax Act.

[Paragraph (f) amended by section 184(1)(b) of Act 31 of 2013 effective on 1 March, 2014 and applicable in respect of a mineral resource transferred on or after that date]

 

(g)       . . . . . .

[Paragraph (g) deleted by section 184(1)(c) of Act 31 of 2013 effective on 1 March, 2014 and applicable in respect of a mineral resource transferred on or after that date]

 

(4)

 

(a)     For purposes of determining “earnings before interest and taxes” in the case of a composite of refined mineral resources and unrefined mineral resources, the refined and unrefined proportions of the composite mineral resource must be determined in accordance with a method of reasonable apportionment that is consistently applied.

 

(b)     For purposes of determining “earnings before interest and taxes”, if the value of the refined proportion of a composite mineral resource does not exceed 10 per cent of the total value of that composite resource, that composite mineral resource may be treated solely as an unrefined mineral resource, and if the value of the unrefined proportion of a composite mineral resource does not exceed 10 per cent of the total value of that composite mineral resource, that composite mineral resource may be treated solely as a refined mineral resource.

[Paragraph (b) substituted by section 98(1)(f) of Act 17 of 2009 effective on 1 March, 2010 and applicable in respect of a mineral resource transferred on or after that date]

 

(5)     For purposes of this section, if “earnings before interest and taxes” is a negative amount that amount is deemed to be nil.

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.