Mining companies face a significant increase in the royalties they pay if the taxman’s current interpretation of the Mineral and Petroleum Resources Royalty Act carries. Originally, gross sales — which are the basis for calculating mining royalties — were meant to exclude the costs for the transport, insurance and handling of minerals that miners pass on to their customers. But the South African Revenue Service’s (SARS’s) interpretation of the law, in a draft binding general ruling, is that companies must prove exactly what costs relate to each transaction. Tax practitioners say this an onerous and impracticable requirement that does not take into account the way mineral sales contracts are drawn up. SAIT says in its submission to SARS that it is "wholly uncommercial" for mining companies to split their prices in agreements and on their invoices to show the details of the delivery terms. It can affect their international competitiveness. In other words, SARS now expect of taxpayers ...

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