A recent amendment to Section 36(11)(e) of the Income Tax Act, 53 of 1968 (Tax Act) now extends the allowable deduction of 'capital expenditure' incurred by mining companies pursuant to the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA). In terms of the Taxation Laws Amendment Bill 2016 (TLAB 2016), the allowable deduction has been extended to include expenditure incurred on infrastructure in terms of Social and Labour Plan (SLP) requirements as per the MPRDA. Interestingly, what necessitated the amendment was the need to recognize SLP requirements and to circumvent administrative difficulties for mining companies and the South African Revenue Services (SARS) in differentiating the use of developmental infrastructure by employees or the community. The successful implementation of such a deduction hinges on a sound SLP system. However, given the challenges within the current SLP system, this amendment could be considered somewhat premature.

SYNOPSIS The mining industry has evolved, such that the means of production that were once in the hands of major players or power houses have become equally accessible to smaller entrants, i.e. junior mining companies and contract miners. Contract mining involves contractual relationships between mine owners or mineral right holders and third parties to conduct mining activities on behalf of the right holders. The current mining income tax legislation has been a considerable obstacle to contract miners. Under its terms, they have been viewed as mining on behalf of third-party mineral rights holders. As such, expenditure incurred in relation to contract mining activities was often disallowed by the South African Revenue Service (SARS). However, the recent judgement of the Supreme Court of Appeal, Benhaus Mining (Pty) Ltd v CSARS 2020 (3) SA 325 (SCA) (Benhaus), rightfully or wrongfully, appears to provide clarity regarding the fate of contract miners' involvement in the mining value chain. The taxpayer, a contract miner, was held to be conducting mining operations within the meaning of S15(a) read with si of the Income Tax Act 58 of 1962 (the Income Tax Act). This paper looks at how contract mining has traversed the mining tax landscape, the implications of the Benhaus judgment, and stresses the necessity for clear policy reform to the mining tax regime and equally to legislation framed to give effect to these policies. Keywords: Contract mining, owner mining, tax, DMRE, mining regime reforms.