Tax governance

Governance oversight

An awareness of TRM throughout the organisation, from the operations to the boardroom, ensures a proactive approach and appropriate governance oversight. TRM should be core to every business decision, from a transaction’s inception to its completion and post-implementation.

Exxaro is committed to complying with the code of corporate practices and conduct set out in King IV. In terms of this code, Exxaro’s board and audit committee assume responsibility for managing tax risks and ensuring Exxaro’s tax strategy is aligned with its business strategy. Tax and tax risks are always on the audit committee’s agenda. Operationally, the group tax manager is accountable for this function and reports directly to the group finance director.

The corporate tax function is organisationally and physically separate from the finance function and centralised at Exxaro’s head office.

The group tax manager reviews tax implications of projects presented to the investment review committee and executive management committee to keep the tax function informed of transactions at inception stage, particularly decisions with significant impact. This ensures effective tax planning and TRM for operational cost savings.

Board-level oversight

Audit committee

Monitors the TRM framework's effectiveness and is accountable for compliance with the framework
Reviews the TRM framework for deficiencies and ensures corrective action is taken
Provides risk management oversight and control

Group-level executive management and oversight

Finance director

Reports tax-related matters to the audit committee

Group manager: risk

Takes overall ownership of the ERM framework
Provides risk management guidance and direction
Ensures the TRM framework is in line with the overall ERM framework

Head: internal audit

Performs an independent evaluation of the effectiveness of the TRM process and controls

Operational management and oversight

Group tax manager

Identifies and analyses tax risks
Manages the implementation of controls and processes to mitigate risks
Manages TRM framework documentation
Reports on TRM to the chief risk officer

Operational execution

Corporate tax function – tax department employees

Execute risk management activities in day‑to‑day activities in accordance with the TRM framework

TRM champion

Assists the group tax manager in implementing and monitoring compliance with controls and procedures as prescribed by the TRM framework
Maintains relevant registers (logs) required by the TRM framework
Assists group tax manager to maintain TRM documentation
Assists group tax manager in reporting on TRM to the chief risk officer

Policies and control

The TRM framework was updated in 2022 and approved by the board in November 2022. The updated framework includes standard operating procedures (SOPs) for VAT, diesel refunds in terms of the diesel rebate scheme, and for carbon tax. Exxaro is revising SOPs for tax compliance and administration, and interim and year-end reporting procedures.

The group tax manager is responsible for:

Implementing and monitoring compliance with controls and procedures prescribed by the framework
Identifying, analysing and evaluating the impact of events and associated risks on the group’s strategic objectives

Our board, audit committee, executive management and other internal and external stakeholders are informed about TRM activities. Exxaro’s risk reporting is driven by stakeholder expectations and requirements and our open and transparent reporting objective.

The group tax manager provides quarterly and biannual reports to the audit committee on the:

Status of compliance with income tax filing to local and offshore tax authorities
Status of significant tax disputes, audits and inquiries by authorities
Significant tax developments affecting the business
Significant tax risks identified (graded as likely to occur, with a tax impact above R30 million, where controls are inadequate to mitigate identified risks)
Tax effect of material transactions such as acquisitions and disposals of assets, investments and businesses

Exxaro maintains transfer pricing policies for offshore transactions with connected parties. In addition to applying the local tax laws of the jurisdictions where we operate, we follow the OECD's principles on transfer pricing and other international tax matters to ensure we pay the correct amount of tax in those jurisdictions.

Our tax function upholds group document retention policies and uses the SARS e-filing system as an additional document database.

Mechanisms for reporting tax-related concerns

Using an independent platform, Exxaro’s stakeholders can anonymously report any concerns, breaches of Exxaro’s code of ethics, fraud or misconduct including tax matters.

Our ESG report provides more detail on Exxaro’s fraud and ethics hotline.

Assurance

Exxaro mitigates tax risk through four lines of defence:

First line of defence: Daily operational management and controls
Second line of defence: Executive and audit committees oversee operational management
Third line of defence: Internal and external assurance of TRM on an ad hoc or rotational basis for objective and independent appraisal of the framework and processes
Fourth line of defence: SARS performs ad hoc audits to ensure compliance with relevant tax legislation

Internal audits

In 2023, our internal auditors conducted an audit on the controls in respect of income tax, VAT and mineral and petroleum resources royalty. The internal audit team’s assessment found that one of the 12 controls was partially effective and has since been updated. The remaining controls were found to be effective and adequate.

Revenue authority audits

The following revenue authority audits commenced in 2022 and/or were finalised in 2023. Assessments were subsequently raised and are being objected to and/or appealed against:

Legal entity	Tax type	Period audited	Status of audit	Result of audit
Exxaro Coal	Income tax	2018 year of assessment	Finalised	SARS raised an additional assessment of R29 million, levied a penalty of R29 million, and interest of R17 million. The disputed taxes were paid and the matter is at the appeal stage.
Exxaro Coal Mpumalanga Proprietary Limited (Exxaro Coal Mpumalanga)	Income tax	2018 to 2020 years of assessment	Finalised	SARS raised an additional assessment of R24 million, levied a penalty of R12 million and interest of R640 000. The disputed taxes were paid and the matter is at the objection stage.
Exxaro Coal	Income tax	2019 to 2021 years of assessment	Audit findings	SARS issued a letter of audit findings proposing to issue additional assessments of approximately R59 million for the 2019 and 2020 years of assessment.
Exxaro Resources	Income tax	2017 to 2021 years of assessment	Information-gathering phase	The Australian Tax Office is reviewing the sale of equity interest in Tronox Limited and Tronox Holdings Plc.

Open years of assessments

The following tax years are open for assessment. Income tax filings to SARS prescribe after three years in terms of the Tax Administration Act, 2011 (Act 28 of 2011) and after five years in terms of Swiss tax legislation.

Entity	Open years of assessment

Major subsidiaries
Exxaro Coal	2018 to 2022
EITAG	2018 to 2022
Material to the group
Exxaro Coal Mpumalanga	2019 to 2022
Exxaro Resources	2019 to 2022
Amakhala Emoyeni Renewable Energy Project 1 Proprietary Limited (Amakhala Emoyeni)	2019 to 2022
Tsitsikamma Community Wind Farm Proprietary Limited (Tsitsikamma community windfarm)	2019 to 2022

Only entities classified as major subsidiaries or material to the group have been listed. A major subsidiary represents 25% or more of total assets or revenue of the consolidated group results (JSE Listings Requirements service issue 25). Material entities do not meet the 25% criteria but are material to the group.