SARS-General3

BINDING CLASS RULING 082: DEDUCTIBILITY OF MINING REHABILITATION INSURANCE PREMIUMS

27 October 2022

The ruling deals with the tax deductibility of short terms insurance premiums paid by mining companies (class members), operating in South Africa, relating to a financial guarantee to secure compliance with their statutory environmental maintenance obligations under the National Environmental Management Act 107 of 1998 (NEMA).

The ruling made in connection with the proposed transaction is as follows:

a) The portion of a premium incurred by a class member which is not taken into account as an expense for the purpose of financial reporting in terms of IFRS will not be deductible under section 11(a) due to the limitation imposed in section 23L(2)).

b) Section 23L(3) will apply where policy benefits are received by or accrue to a mining company who was denied a deduction in terms of section 23L(2) of any premiums paid under such policy.

c) Section 23L(2) will not apply to the premium, or portion thereof, incurred by a class member which is taken into account as an expense for the purpose of financial reporting pursuant to IFRS. The premium, or portion thereof, will accordingly be deductible under section 11(a) read with section 23(g).

d) If the annual premium is incurred within the first six months of the class member’s year of assessment, section 23H will not apply to the deductible portion.

e) Section 23H will apply to the deductible portion of the premium to the extent that the benefit of the premium extends beyond six months of the class member’s year-end if the annual premium is incurred in the last six months of its year of assessment.

This binding class ruling is valid for a period of five years from 29 September 2022.

You can read the ruling here.

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