The South African mining industry is required by law to pay taxes and royalties as follows:

The Mineral and Petroleum Royalty Act, 2008 sets out the revenue-based royalties' payable on mineral resources that are extracted within South Africa and transferred. The Royalty Act differentiates between refined and unrefined mineral resources. The mining royalty percentage is capped at 5 per cent for refined mineral resources and 7 per cent for unrefined mineral resources. The Royalty Act uses two variables to calculate the royalty liability, the value of the minerals and the royalty percentage rate, which is applied to the base.

Mining companies may also be subject to income tax, capital gains tax, withholding tax, transaction taxes such as VAT, transfer duty and securities transfer tax in terms of the Income Tax Act, 1967.

The Artisanal and Small-Scale mining industry is not absolved from the obligation to pay taxes and royalties and thus contribute to socio-economic growth. However, due to the informality of the sector, the ASM industries contribution to the revenue collection in largely unknown.

National Treasury has devised instruments and incentives to support small businesses. These include (i) the small business corporation incentive, (ii) turn over taxation regime and (iii) venture capital company tax regime. These instruments and incentives (discussed below) are available to artisanal and small-scale miners.

Small business corporation

The Small Business Corporation (SBC) incentive was introduced in 2001 in terms of section 12E of the Income Tax Act, 2001 (ITA). The incentive was introduced to contribute to small business development within the wider ambit of improving economic growth in South Africa. Small business enterprises play an important role in economic development and employment creation. The small business incentive regime offers graduated tax rates of 0%, 7%, 21% for initial proportions of taxable income earned by the company up to R550 000. The incentive is available to companies with a turnover that does not exceed R20 million. Currently there are about 100 000 SBC's benefiting from this tax incentive.

Table 1: Small Business Corporations (SBC) graduated rates tax table

Financial years ending on any date between 1 April 2020 and 31 March 2021:

Turnover tax

The turnover tax regime was introduced in 2008 in terms of the Sixth Schedule to the ITA. This regime is part of Government's   broader mandate to encourage entrepreneurship and create an enabling environment for small businesses to survive and grow, and to reduce the tax compliance burden on businesses with an annual turnover of up to R1 million. Turnover tax is a simplified system aimed at making it easier for micro business to meet their tax obligations. The turnover tax system replaces income tax, VAT, provisional tax, capital gains tax and dividends tax for micro businesses with a qualifying annual turnover of R 1 million or less.

A micro business that is registered for turnover tax can, however, elect to remain in the VAT system (from 1 March 2012). Turnover tax is optional, meaning a micro business can decide if it wants to use this or the current tax system where businesses can deduct costs. It is available to sole proprietors (individuals), partnerships, close corporations, Co-operatives, and companies with effect from 1 March 2009.

Turnover tax is worked out by applying a tax rate to the taxable turnover of a micro business. The rates are applicable for any year of assessment ending during the period of 12 months ending on 28 February 2018. There are less than 10 000 companies using TOT. Take up is low because micro businesses are liable for tax even if making a loss (tax is based on turnover). If, however, the micro business was outside the turnover tax regime, they would have recorded an assessed loss which would have been carried over to the next period of assessment. Micro businesses also cannot deduct expenses like with SBC and, as a result, most small businesses opt for sole proprietor option (taxed as an individual) or SBC. The turnover tax rates set out in the Sixth Schedule of ITA are as following:

Venture Capital Company (VCC)

Access to equity finance remains one of the main challenges to the economic growth of small and medium-sized businesses and junior mining exploration. In response to this challenge, in 2008, Government enacted the venture capital company (VCC) tax regime in terms of section 12J of the ITA with the aim of creating a pooling mechanism for investors to channel funds into small businesses and junior mining operations. The VCC itself (based on private equity model) is intended to act as an "angel investor" for such businesses by providing equity and supportive management services. The VCC is intended to be a marketing vehicle that will attract retail investors. It has the benefit of bringing together small investors as well as concentrating investment expertise in favour of the small business sector. Investors get deduction for equity investments in VCCs. Currently, there are over 100 VCCs registered.

Government policy proposals: