Exxaro report selector 2019

Integrated report 2019

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Exxaro Resources Limited
Tax report for the year ended 31 December 2019

Currently viewing: Tax performance

Tax performance

Total tax contribution borne and paid
Total tax contribution 2019
(Rm)		   2018
restated
(Rm)
Payments to government (taxation contribution) 1 693   1 652
Direct taxes per country 1 163   997
South Africa1 1 138   976
Switzerland 25   21
Indirect taxes (139)   168
VAT (155)   153
Levied on purchases of goods and services (3 572)   (2 992)
Charged on turnover 3 417   3 145
Dividend withholding tax – local 1   1
Dividend withholding tax – Switzerland 13   9
Securities transfer tax 2   5
Levies paid to government 669   487
Rates and taxes 22   6
Mineral and Petroleum Resources Royalty 568   413
Workmen's Compensation Fund2 20   14
Unemployment Insurance Fund 13   12
Skills Development Levy2 46   42

1 The number disclosed in the prior year incorrectly included the local and offshore dividend withholding tax that is also shown separately.

2 The number disclosed in the prior year has been restated because it incorrectly excluded Forzando Proprietary Limited, Dorstfontein Proprietary Limited and Exxaro Coal Central Proprietary Limited.

Total tax contribution collected on behalf of government
2019 
(Rm)		   2018
restated
(Rm)		  
Additional amounts collected by the group on behalf of government 1 328    1 155   
Unemployment Insurance Fund 13    12   
PAYE deducted from remuneration paid1 1 315    1 163   
1 The number disclosed in the prior year has been restated because it incorrectly excluded Forzando Proprietary Limited, Dorstfontein Proprietary Limited and Exxaro Coal Central Proprietary Limited.

 

Total tax contribution 2019 (%)
  
Total tax contribution 2018 (%)
 
Effective tax rate reconciliation

The effective tax rate for the Exxaro group is calculated as 9.3% (10.9% excluding discontinued operations). The difference in the standard rate of 28% is explained below:

Rate reconciliation Total 
% 		   Excluding 
discontinued 
operations 
% 		  
Standard tax rate 28    28   
Capital gains, special allowances and exempt income1 (5.5)   (1.1)  
Equity-accounted investment income2 (11.9)   (14.7)  
Prior-year adjustments (1.2)   (1.4)  
Withholding taxes 0.1    0.1   
Non-deductible expenditure3 1.5    1   
Other non-taxable receipts and tax deductions (3)   (2.6)  
Remeasurement of foreign tax rates (0.3)   (0.3)  
Derecognition of deferred tax assets4 1.3    1.6   
Imputed income from controlled foreign companies (CFC) 0.3    0.3   
Effective tax rate 9.3    10.9   
1 The majority of capital gains realised in 2018 relates to the sale of the 14 million Tronox Limited shares as well as the redemption of Exxaro's membership interest in the Tronox UK LLP. The investment in Tronox Limited is classified for accounting purposes as a "discontinued operation" in 2019.
2 A significant part of equity-accounted investment income comes from Sishen Iron Ore Company Limited amounting to R4 billion.
3 Included in non-deductible expenses is a fair value adjustment relating to the expiry of the BEE put option agreement in 2019.
4 Following the impairment of the assets in Forzando Proprietary Limited, a decision was taken not to recognise the deferred tax asset in Forzando on calculated tax losses and unredeemed capital expenditure since the budgeted future tax profits of the company does not support the recoverability of the asset. Other significant deferred tax assets that were not recognised were the deferred tax assets for Exxaro Coal Central Proprietary Limited and Exxaro Coastal Coal Proprietary Limited.
Country-by-country reporting: current tax accrual expense
Switzerland   Australia   South Africa   Total  
Income tax (Rm) 13   —   1 006   1 019  
Dividend withholding tax1 (Rm) —   —   14   14  
Total (Rm) 13   —   1 020   1 033  
Effective tax rate (%) 9   —   9.3   9.3  
Statutory tax rate (%) 9   30   28   28  

1 Included is a dividend withholding tax of R13 million paid by EITAG to the Swiss revenue authorities but incurred in ROCSI, a South African company.

IFRIC 23 – Uncertain tax positions

In the prior year, the following two uncertain tax positions were reported:

  1. A SARS dispute on imputing income from controlled foreign companies resulted in a tax liability of R255 million, including interest and penalties as at 31 December 2018:
    • After unsuccessful dispute resolution attempts, Exxaro and SARS litigated. The dispute has been favourably settled on 30 September 2019 with no further cash outflow to Exxaro.
  2. An additional assessment for royalties received from SARS relating to Mafube Mining Proprietary Limited (Mafube), totalling some R280 million (Exxaro has a 50% joint venture with Anglo American hence R140 million Exxaro exposure), including interest and penalties:
    • Mafube objected to the assessment but SARS regretfully disallowed the objection. An appeal was lodged on 19 June 2019 against the disallowance of the objection. In December 2019, SARS communicated that it was willing to negotiate a settlement, which Mafube declined. On 5 March 2020, SARS was informed that Mafube would proceed with the appeal in the Tax Court.

No known uncertain tax positions relating to income tax exist for the 2019 financial year. Mineral royalties do not fall within the scope of IFRIC 23.