Business / Companies
Zimplats warns of possible tax dispute with govt
03 Sep 2020 at 06:17hrs | Views
MINING concern Zimplats has warned that a possible dispute over payment of taxes with the government could have an impact on future financial results.
This was revealed by the platinum miner in its financial results for the year ended June 30, 2020.
"Through a public notice 26 of 2019 published on 19 June 2019, the tax authorities, introduced a computation formula which would consequently require an apportionment of income tax payment between local and foreign currency. The group has been lawfully computing and effecting payment of income taxes in local currency in settlement of tax liabilities. Expert view on this matter is that settlement of these taxes in this manner by the group is in full discharge of its obligations. It is, however, recognised that the tax authorities may hold a different interpretation of the fiscal legislation as read with the public notices available to guide taxpayers," Zimplats said.
"This difference in interpretation may result in uncertainty associated with the payment of taxes in foreign currency, with the resultant effect that it is possible that at a future date, on conclusion of the matter, the final outcome may vary significantly and may impact financial results in the year in which such a determination is made. In the absence of a legal basis upon which to base the potential determination, the group is unable to quantify at this stage, what the potential impact of the above could be."
The platinum miner has had several battles with government over tax matters. Its accounts were garnished over the levying of customs taxes and penalties between 2009 and 2013 before the High Court ruled in its favour in 2015.
After suspending the use of foreign currency in local transactions in June last year, government redollarised in April this year as inflation raged and the Zimdollar plummeted against major currencies during the coronavirus pandemic.
The tax agency Zimra has started demanding that companies with foreign earnings should pay tax in foreign currency, creating a tax headache for foreign-owned miners.
Zimplats revenue increased by 38% to US$868,9 million from US$631 million in FY2019 mainly due to the increase in average prices of rhodium, palladium, gold and nickel, the miner said in its report.
"6E (six elements consist of platinum, palladium, rhodium, gold, ruthenium and iridium) ounces sold decreased by 3% from 573 009 ounces in FY2019 to 554 944 ounces in FY2020," Zimplats said.
"This was mainly due to the force majeure notice issued by Impala Platinum Limited which resulted in the suspension of sales for more than a month in the final quarter of the year. The force majeure notice was in response to the COVID-19 pandemic-induced lockdown in South Africa."
Cost of sales increased by 8% from US$443,8 million in FY2019 to US$480.4 million mainly due to the increase in share-based compensation and depreciation expense.
The increase in depreciation expense was due to the change in the estimation method of depreciation for surface and metallurgical assets from units of production to straight line as well as an increase in the asset base during the year.
Gross profit margin improved to 45% from 30% in FY2019 mainly due to the improvement in metal prices.
Operating cash cost per 6E ounce increased by 2% from US$602 in FY2019 to US$613 in FY2020 mainly due to inflation.
Profit before income tax for the year increased to US$374,2 million from US$205,3 million in FY2019.
Income tax expenses for the year increased to US$112,4 million from US$60,5 million in FY2019 mainly driven by the increase in taxable profit.
Resultantly, profit after tax for the year increased to US$261,8 million from US$144,9 million in FY2019.
The group spent US$104,2 million on capital projects (stay in business, replacement mines and expansion projects) compared to US$115 million spent in FY2019
Zimplats said it has taken a number of measures to minimise the impact of the COVID-19 pandemic on employees' health and mining operations, including a review of procedures and practices to minimise the possible spread of the virus and capacitation of the internal medical facilities at the workplace.
These include facilities for screening, testing, quarantining, isolating and treatment as well as risk profiling to identify employees at high risk of severe disease.
This was revealed by the platinum miner in its financial results for the year ended June 30, 2020.
"Through a public notice 26 of 2019 published on 19 June 2019, the tax authorities, introduced a computation formula which would consequently require an apportionment of income tax payment between local and foreign currency. The group has been lawfully computing and effecting payment of income taxes in local currency in settlement of tax liabilities. Expert view on this matter is that settlement of these taxes in this manner by the group is in full discharge of its obligations. It is, however, recognised that the tax authorities may hold a different interpretation of the fiscal legislation as read with the public notices available to guide taxpayers," Zimplats said.
"This difference in interpretation may result in uncertainty associated with the payment of taxes in foreign currency, with the resultant effect that it is possible that at a future date, on conclusion of the matter, the final outcome may vary significantly and may impact financial results in the year in which such a determination is made. In the absence of a legal basis upon which to base the potential determination, the group is unable to quantify at this stage, what the potential impact of the above could be."
The platinum miner has had several battles with government over tax matters. Its accounts were garnished over the levying of customs taxes and penalties between 2009 and 2013 before the High Court ruled in its favour in 2015.
After suspending the use of foreign currency in local transactions in June last year, government redollarised in April this year as inflation raged and the Zimdollar plummeted against major currencies during the coronavirus pandemic.
The tax agency Zimra has started demanding that companies with foreign earnings should pay tax in foreign currency, creating a tax headache for foreign-owned miners.
Zimplats revenue increased by 38% to US$868,9 million from US$631 million in FY2019 mainly due to the increase in average prices of rhodium, palladium, gold and nickel, the miner said in its report.
"6E (six elements consist of platinum, palladium, rhodium, gold, ruthenium and iridium) ounces sold decreased by 3% from 573 009 ounces in FY2019 to 554 944 ounces in FY2020," Zimplats said.
"This was mainly due to the force majeure notice issued by Impala Platinum Limited which resulted in the suspension of sales for more than a month in the final quarter of the year. The force majeure notice was in response to the COVID-19 pandemic-induced lockdown in South Africa."
Cost of sales increased by 8% from US$443,8 million in FY2019 to US$480.4 million mainly due to the increase in share-based compensation and depreciation expense.
The increase in depreciation expense was due to the change in the estimation method of depreciation for surface and metallurgical assets from units of production to straight line as well as an increase in the asset base during the year.
Gross profit margin improved to 45% from 30% in FY2019 mainly due to the improvement in metal prices.
Operating cash cost per 6E ounce increased by 2% from US$602 in FY2019 to US$613 in FY2020 mainly due to inflation.
Profit before income tax for the year increased to US$374,2 million from US$205,3 million in FY2019.
Income tax expenses for the year increased to US$112,4 million from US$60,5 million in FY2019 mainly driven by the increase in taxable profit.
Resultantly, profit after tax for the year increased to US$261,8 million from US$144,9 million in FY2019.
The group spent US$104,2 million on capital projects (stay in business, replacement mines and expansion projects) compared to US$115 million spent in FY2019
Zimplats said it has taken a number of measures to minimise the impact of the COVID-19 pandemic on employees' health and mining operations, including a review of procedures and practices to minimise the possible spread of the virus and capacitation of the internal medical facilities at the workplace.
These include facilities for screening, testing, quarantining, isolating and treatment as well as risk profiling to identify employees at high risk of severe disease.
Source - newsday
