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.