A tax court has ruled in favour of mining firm Tharisa Minerals following a dispute with the South African Revenue Service (SARS) over royalty payments for platinum group metal (PGM) miners.
According to a report published by Business Day, South Africa’s tax court found that the mineral royalty tax imposed by SARS on Tharisa in 2015 and 2017 was based on a flawed, one-size-fits-all formula that failed to consider the operational realities of PGM recovery.
The publication noted that the mineral royalty tax – which is calculated as a percentage of gross sales and earnings before interest and tax (EBIT) – is one component of the broader tax burden faced by local mining companies.
Notably, in the case of unrefined PGMs, the royalty tax rate depends on the grade of the material, with higher grades implying better earnings and, therefore, attracting higher taxes.
Reportedly, SARS had artificially inflated Tharisa’s gross sales and EBIT by assuming it met the 150 parts per million (ppm) standard – effectively increasing the company’s tax liability by applying a higher royalty rate.
However, Tharisa’s actual average grade for PGMs was below the 150 ppm threshold, meaning the higher tax rate was unjustified.
The mining firm has welcomed the ruling.
