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The tax treatment of interest incurred by mining companies to finance mining capital expenditure
Mini Dissertation (LLM (Tax Law))--University of Pretoria, 2020.
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| Format: | Thesis |
| Language: | English |
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University of Pretoria
2020
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| _version_ | 1867613436288958464 |
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| access_status_str | Open Access |
| author2 | Van Zyl, Stephanus |
| author_browse | Van Zyl, Stephanus |
| author_facet | Van Zyl, Stephanus |
| collection | Thesis |
| dc_rights_str_mv | © 2019 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. |
| description | Mini Dissertation (LLM (Tax Law))--University of Pretoria, 2020. |
| format | Thesis |
| id | oai:repository.up.ac.za:2263/77372 |
| institution | University of Pretoria (South Africa) |
| language | English |
| last_indexed | 2026-06-10T12:36:06.757Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UPSpace — University of Pretoria Institutional Repository |
| publishDate | 2020 |
| publishDateRange | 2020 |
| publishDateSort | 2020 |
| publisher | University of Pretoria |
| publisherStr | University of Pretoria |
| record_format | dspace |
| source_str | UPSpace — University of Pretoria Institutional Repository |
| spelling | oai:repository.up.ac.za:2263/77372 The tax treatment of interest incurred by mining companies to finance mining capital expenditure Van Zyl, Stephanus Lelethu@lm-inc.co.za Mbangi, Lelethu UCTD mining capital expenditure Mini Dissertation (LLM (Tax Law))--University of Pretoria, 2020. This dissertation examines the tax treatment of interest incurred in financing mining capital expenditure. The capital expenditure under consideration is shaft-sinking and mining equipment. The reason for concern as regards this form of capital expenditure lies in the provisions of section 36(11)(a) of the Income Tax Act 58 of 1962 (‘the Act’). This provision counteracts section 15(a) read with sections 36(7E) and 36(7F) promulgated to encourage investment in mining through the immediate redemption of capital expenditure. Although mining companies generally finance shaft sinking and the acquisition of mining equipment, interest or finance charges are not capital expenditure for the purposes of section 36 of the Act. The study finds that on the basis of the exclusion referred to above, interest or finance charges cannot be deducted in terms of section 15(a) of the Act, against income earned from mining operations. The study, however, finds that section 11(a) or section 24J of the Act, can be relied on to deduct interest incurred to finance shaft-sinking and mine equipment. In order to rely on section 11(a), the interest or finance charges must have been incurred, but not however necessarily, by a person conducting trade for the production of income. It must further not be capital in nature. In contrast, section 24J(2), requires a person who is conducting trade to have incurred the interest in the production of income – there is no requirement that it must not be of a capital nature. Section 24JA works hand-in-hand with section 24J in that any amount deemed as interest in terms of a diminishing musharaka or murabaha arrangement, can be deducted against income under section 24J(2). The study recommends that section 36(11)(a) be amended by including interest or finance as capital expenditure. If this is done mining operators will no longer have to use sections 11(a) or 24J – provisions which fall outside of the mining tax regime – to claim a deduction. Amending section 36(11) would ensure that interest or finance charges are fully deductible against mining income because a deduction under section 11(a) or 24J(2) depends on the quantum of non-mining income. The study concludes that this recommendation is unlikely to be considered as the 2016 Davis Tax Committee Report on Hard Rock Mining recommended to the Minister of Finance that the entire mining tax regime be scrapped and that the taxation of mining be aligned with the tax regime for manufacturing. Mercantile Law LLM (Tax Law) Unrestricted 2020-12-11T12:45:49Z 2020-12-11T12:45:49Z 2021 2020 Dissertation Mbangi, L 2020, The tax treatment of interest incurred by mining companies to finance mining capital expenditure, LLM (Tax Law) Dissertation, University of Pretoria, Pretoria, viewed yymmdd <http://hdl.handle.net/2263/77372> A2021 http://hdl.handle.net/2263/77372 en © 2019 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria. application/pdf application/pdf University of Pretoria |
| spellingShingle | UCTD mining capital expenditure The tax treatment of interest incurred by mining companies to finance mining capital expenditure |
| title | The tax treatment of interest incurred by mining companies to finance mining capital expenditure |
| title_full | The tax treatment of interest incurred by mining companies to finance mining capital expenditure |
| title_fullStr | The tax treatment of interest incurred by mining companies to finance mining capital expenditure |
| title_full_unstemmed | The tax treatment of interest incurred by mining companies to finance mining capital expenditure |
| title_short | The tax treatment of interest incurred by mining companies to finance mining capital expenditure |
| title_sort | tax treatment of interest incurred by mining companies to finance mining capital expenditure |
| topic | UCTD mining capital expenditure |
| url | http://hdl.handle.net/2263/77372 |