Mineral Royalties Tax

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GRA⋅Domestic Tax⋅Tax Types⋅Mineral Royalties Tax

Mineral Royalties Tax

Minerals and mining operations Tax (Mineral Royalty) is imposed on income of a person engaged in mineral operations. Subject to any fiscal stability agreement, the mineral royalty rate is 5% of the total revenue earned from mining operations and is calculated for each year of assessment. A person’s income from separate mineral operations are taxed separately.

Where two or more persons, apart from a partnership hold a mineral right, each person is taxed separately. Mineral operations relating to a mine and shared processing facility are regarded as a separate operation.

Income from Mineral Operations

The income of a person from mineral operations includes:

Income received from disposal of minerals.
A compensation received from an insurance policy in respect of loss or destruction of minerals;
Amount received for sale of information pertaining to the operations or mineral reserves;
A gain from the disposal or assignment of interest;
Surplus from an approved rehabilitation fund; and
Other incidental revenue received.

Deductions for Mineral Operations

The following shall be included as deductions from the assessable income:

Ground rent and royalties paid;
Capital allowances granted;
Contributions to and other expenses incurred in respect of an approved rehabilitation fund;
Expenses incurred in the course of reclamation and closure of the mineral operation; and
Any other expenses incurred.

The following amounts are not allowed to be deducted from assessable income:

Research and development expenditure;
Amount not wholly, exclusively and necessarily incurred in acquiring or improving the valuable asset used in the operation;
Expense not based on arm’s length standard;
Bonus payments; or
Expenditure incurred for breach of Mineral Agreement.

Losses from Mineral Operations:

An unrelieved loss shall be deducted by the person in the order in which the loss is incurred. It may be deducted from only future income from that separate mineral operation.

Disposal of mineral rights:

A person who holds interest in an entity that holds a mineral right is treated as holding interest as a capital asset employed.

An entity is considered to have disposed of and re-acquired its interest by incurring an expenditure equal to the amount received where the underlying ownership changes by five percent (5%) or more.

The consideration for the disposal is equal to the amount received, amount receivable or the market value, whichever is higher.

A resident person shall withhold tax at a rate of 1.5% when the person pays for unprocessed precious minerals located in the country or won from the country.