Exxaro believes in sustainable value creation, which we enable by carefully considering the relationship between the capitals we use and affect. Integrated in our business model and strategy, these include natural, social and relationship, manufactured, human, intellectual and financial capital. We continuously strive to positively contribute to and negate any adverse impacts on these capitals to ensure sustained success and foster a sustainable operating environment for Africa and beyond.
Taxation is an integral part of our business strategy, as tax is the natural outflow of each business decision. Exxaro manages taxation as part of its enterprise risk management (ERM) framework, which strives to create sustainable value for all stakeholders through operational efficiency, continuous improvement, regulatory compliance and responsible citizenship, within acceptable risk parameters. Exxaro's TRM philosophy is aligned to its risk management philosophy, business strategy and objectives. At a high level, Exxaro's TRM strategy aims to create value, protect Exxaro against loss, ensure effective tax planning and compliance with tax legislation and preserve appropriate financial reporting.
Exxaro's TRM framework articulates our tax strategy and is our primary means of managing our tax approach. The framework is aimed at an internal audience and is not available publicly. All information deemed relevant for an external audience is included in this report.
The TRM framework is reviewed on an ad hoc basis when significant changes occur that affect Exxaro and its risk appetite. Any changes to the TRM framework must be approved by the audit committee. The group tax manager, through the finance director, is accountable to the board of directors (board) for designing, implementing, monitoring and reporting the TRM process.
Our approach to tax supports and contributes to the group's sustainable value creation goals by:
Exxaro maintains healthy relationships with the revenue authorities in all jurisdictions where we operate. Exxaro applies for rulings where tax legislation is uncertain and endeavours to attend to tax information requests and audits from Revenue authorities in a comprehensive and timely manner. In South Africa, South African Revenue Service (SARS) officers conduct an annual business review of Exxaro's coal business, for which we share specific requested information and discuss the future outlook of our coal business.
Refer to revenue authority audits.
We previously commented that Mafube Coal Mining Proprietary Limited (Mafube), Exxaro's 50% JV with Thungela, was involved in a litigation process with SARS regarding the impugned additional mineral and petroleum resources royalty assessments totalling R190 million and penalties of R19 million (with an exposure of R105 million to Exxaro). Although court dates for the appeal were set for 30 August 2023 and 1 September 2023, a settlement was reached with SARS on 16 August 2023. It was agreed that the additional assessment would be reduced to R14.8 million and the penalty of R19 million be waived. An agreement on the basis of the interest calculation has not yet been reached and the settlement agreement will be finalised once an agreement on the interest has been concluded.
Exxaro Coal is in a litigation process to obtain an order against SARS to pay interest on the late payments of value-added tax (VAT) refunds. SARS is opposing the action. The High Court has not yet allocated a date for the hearing of the opposed motion.
Exxaro participates in local tax reforms and the development of an effective tax system through tax working groups of the Minerals Council South Africa and the South African Institute of Taxation (SAIT). Exxaro's tax manager is an executive team member of the SAIT mining tax technical work group.
In 2023, material changes were made to the proposed Interpretation Note issued by SARS on 24 August 2023. Changes directly affecting Exxaro related to the determining of the calorific value of coal for mineral and petroleum resources royalty legislation. Exxaro actively participated in industry working groups and responded to the proposed draft Interpretation Note.
For annual legislative cycle changes, Exxaro participates in industry working groups as normal, such as section 12BA introduced by the 2023 Taxation Law Amendment Act and others.
Exxaro will continue to play an active role in the industry and take part in relevant discussions as they arise.
Tax havens are countries or jurisdictions offering certain tax benefits such as lower tax rates, credit mechanisms or deductions, resulting in limited or no tax levying on certain profits. Switzerland is generally considered a tax haven due to its low corporate tax rate of approximately 12% (a combination of federal, cantonal and communal taxes).
Exxaro's logistics and marketing office, Exxaro International Trading AG (EITAG), in Zug, Switzerland, is considered a trading hub for various commodities, including coal. Exxaro's operation in Zug is based on sound business principles and the company does not derive a tax benefit from operating in Switzerland.
Although EITAG pays 12% corporate tax in Switzerland (federal and cantonal taxes combined), EITAG's profits are imputed and included in the taxable income of Rocsi Holdings Proprietary Limited (Rocsi) in terms of section 9D of the Income Tax Act, 1962 (Act 58 of 1962) (Income Tax Act). Effective 2 October 2023, Exxaro Coal acquired all the issued share capital of EITAG from Rocsi using the corporate rules contained in section 45 of the Income Tax Act.
Refer to country-by-country information.
The Organisation for Economic Co-operation and Development (OECD) leads the base erosion and profit sharing (BEPS) 2.0 project. 140 countries committed to implementing the OECD global minimum tax for multinational enterprise (MNE) groups with a consolidated revenue of EUR750 million or more (also referred to as Pillar Two or Global Anti-Base Erosion (GloBE) Rules). This ensures that MNE groups pay at least 15% taxes in each country they operate. Exxaro is classified as a qualifying MNE.
On 22 December 2023, the Swiss Federal Council implemented, in a first step, the qualifying domestic minimum top-up tax (QDMTT) for financial years starting on or after 1 January 2024. Regarding the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR), the Federal Council postponed implementation and will decide on this later. Although the deadline for filing the first Swiss QDMTT return and GloBE information return is 30 June 2026, the tax provision for 2024 must be included in Exxaro's 2024 interim and year-end reporting.
EITAG is a Swiss-incorporated company and is taxed at an effective tax rate of 12%. Therefore, Exxaro will qualify for Pillar Two filings in terms of Swiss legislation.
The South African 2024 Budget Review documents, published on 21 February 2024, announced that an IIR and a domestic minimum top-up tax (DMTT) would be effective from 1 January 2024. The DMTT will enable SARS to collect a top-up tax for qualifying MNEs paying an effective tax rate of less than 15%. The details of the proposal will be set out in the explanatory memorandum and Draft Global Minimum Tax Bill.
In Australia's 2023-24 budget, the government announced the implementation of a 15% global minimum tax and domestic minimum tax. These are key aspects of Pillar Two of the OECD/ G20 Two Pillar Solution to address the tax challenges arising from the digitalisation of the economy.
In-scope groups need to undertake constant regulation scanning to track a fast-evolving cross-border rule set and identify new data sets to gather and develop new compliance processes, which may differ in each territory.
Exxaro recognises the value of its human capital and continues to invest in training. Grootegeluk and Matla claimed learnership allowances for 522 new registered learners during 2023 (2022: 378) and 55 other learners completed their training agreements (2022: 34). These mines claimed total learnership allowances amounting to R19.2 million (2022: R13.3 million), resulting in a total tax saving of R5.2 million (2022: R3.7 million).
Exxaro appointed an external service provider late in 2023 to assist with identifying projects that could benefit from research and development incentives in terms of section 11D of the Income Tax Act.
Refer to building momentum with people in our ESG report.
In support of Exxaro's goals to continue lowering its energy consumption, we will continue to pursue the benefits of energy efficiency allowances offered in terms of the Income Tax Act.
For more information on Exxaro's climate change response and decarbonisation strategy, refer to the climate change and energy efficiency sections of our ESG report.
LSP is an SPV formed to house the LSP project. The project is in its development phase, with a planned completion date of early 2025. To qualify for the incentive, which is a deduction of 125% of the cost incurred, the SPV would have had to bring photovoltaic solar energy assets into use on or before 1 March 2025.
The Carbon Offset Administration System (COAS) facilitates the listing, transfer and retirement of carbon tax credits to offset carbon tax liabilities. The COAS starts with the approval of a specific project by the relevant project standard. Standards allowed into the COAS include Clean Development Mechanism, Verified Carbon Standard and the Gold Standard. The Climate, Community and Biodiversity Alliance Standard is included in the Verified Carbon Standard. The credits are generated through projects that reduce emissions like renewable energy projects or re-forestation efforts. In South Africa, when a company is unable to reduce its carbon emissions, the government allows it to offset its emissions through credits for tax purposes. The National Treasury's policy regarding the carbon offset scheme will serve as a flexibility mechanism enabling the industry to invest in mitigation projects. In Exxaro's case, the carbon offset will be applicable when the SPV solar photovoltaic project is brought into use.
The current carbon tax liability is R2.7 million. With the 2024 budget increases announced by the Minister of Finance, there will be a slight increase to R3.3 million, using the same 2023 carbon emissions.
Exxaro group tax was involved in consolidating the Exxaro social investment vehicles to ensure compliance with the provisions of section 30 read with section 18A of the Income Tax Act. Effective 4 December 2023, all Exxaro's social investment vehicles structures were rationalised and consolidated into one legal entity. The entity, Exxaro Aga Setshaba, is a non-profit company (formerly known as Exxaro Matla Setshabeng) (the NPC). This resulted in an optimum structure, reduced administration costs, freeing up resources and increasing transparency.
The NPC, in its revised form and expanded objectives, will benefit more communities and the general public at large, including communities where Exxaro operates. The NPC conducts the public benefit activities listed in the Ninth Schedule to the Income Tax Act, such as social upliftment, education, healthcare and building critical infrastructure in the communities it operates in, among others.
The NPC's source of income is dividends and donations. As such, it enjoys a preferential tax status from SARS, which entitles donors to deduct donations made to the NPC from their taxable income in accordance with the provisions of section 18A of the Income Tax Act.
Refer to the ESG report for more information on our corporate social responsibility.
Exxaro engages proactively with our stakeholders to create shared value. Stakeholder views and concerns are managed through a holistic stakeholder engagement approach. Our stakeholder engagement procedures enable us to respond to any tax-related matters that may arise, ensuring engagement is targeted, meaningful and transparent.
Refer to the ESG report for more information on our stakeholder-inclusive approach.
Honest and transparent engagements with stakeholders on tax matters are summarised below.
| Stakeholder group | Key concerns and expectations | Our response |
| SARS |
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| Financial reporting audiences (shareholders and financiers) |
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| Communities |
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| Industry |
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Exxaro undertakes the following performance management initiatives in the tax department:
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The group tax manager ensures employees are qualified with the necessary skills and experience for each tax function role and its responsibilities |
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Exxaro invests in training and formal postgraduate studies, and employees regularly attend courses and seminars |
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Formal development programmes are in place for tax employees |
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Personal performance appraisals assess employees’ commitment to tax risk management |
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Incentive schemes reward tax employees for performance and non-performance is addressed by the responsible line manager |
Robotic process automation (RPA) and artificial intelligence will assist Exxaro's tax function to become a valued strategic partner by improving efficiency and effectiveness. RPA inherently eliminates repetitive, time-consuming manual tasks and mitigates tax risks. The following digital automation projects were approved and are in different stages of implementation.
| Stakeholder group | Our response |
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Automated VAT apportionment calculations Automated data extraction from e-filing Monitoring dashboard on tax compliance and administration |
Completed and implemented Completed and implemented Work in progress: the tax solutions project was expanded to integrate with the SARS e-filing portal using real-time synchronisation |
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