The main aspects of the mining royalty bill approved by Congress are described below:
1.- Establishment of a Mining Royalty: A new tax called Mining Royalty is established, which is structured on the basis of 2 components:
i.- Ad valorem, consisting of the application of a fixed 1% rate on the annual copper sales of mining companies whose average annual sales for the last 6 years are greater than the equivalent of 50,000 metric tons of fine copper (“MT”).
When in a business year the adjusted taxable mining operating income is negative, the ad-valorem component would correspond to the amount resulting from subtracting the negative amount of the adjusted taxable mining operating income from the ad-valorem amount.
ii.- Mining margin component, applicable over the adjusted taxable mining operating income.
For those mining companies whose average annual sales for the last 6 years come from more than 50% of copper, and exceed 50,000 MT, with increasing rates depending on the mining operating margin of the year, according to the following table:
| Mining operating margin | Maximum effective rate |
|---|---|
| < 20 | 8% |
| 20 – 45 | 12% |
| 45 – 60 | 26% |
| > 60 | 26% |
Mining companies that do not comply with the requirements of the preceding paragraph (i.e., whose average sales for the last 6 years do not exceed 50,000 MT, or exceeding them are less than 50% of copper) will be subject to progressive rates by brackets, depending on the magnitude of their sales in equivalent value per MT, according to the following table:
| Equivalent value of annual sales (MT) | Marginal rate | Maximum effective rate |
|---|---|---|
| < 12.000 | Exempt | 0% |
| 12.001 – 15.000 | 0.4% | 0.08% |
| 15.001 – 20.000 | 0.9% | 0.29% |
| 20.001 – 25.000 | 1.4% | 0.51% |
| 25.001 – 30.000 | 1.9% | 0.74% |
| 30.001 – 35.000 | 2.4% | 0.98% |
| 35.001 – 40.000 | 2.9% | 1.22% |
| 40.001 – 50.000 | 4.4% | 1.85% |
If the equivalent value of the average annual sales for the last 6 years in MT exceeds 50,000, mining companies will be subject to a progressive rate that will depend on the mining operating margin of the year, according to the following table:
| Mining operating margin | Marginal rate | Maximum effective rate |
|---|---|---|
| < 35 | 5% | 5% |
| 35 – 40 | 8% | 5.38% |
| 40 – 45 | 10.5% | 5.94% |
| 45 – 50 | 13% | 6.65% |
| 50 – 55 | 15.5% | 7.45% |
| 55 – 60 | 18% | 8.33% |
| 60 – 65 | 21% | 9.31% |
| 65 – 70 | 24% | 10.36% |
| 70 – 75 | 27.5% | 11.50% |
| 75 – 80 | 31% | 12.72% |
| 80 – 85 | 34.5% | 14% |
| > 85 | 14% | 14% |
2.- A maximum potential tax burden of 46.5% is set on the operating profitability of the mining entity, measured as the adjusted taxable mining operating income, before taxes. This limit considers jointly the mining royalty, corporate tax and withholding tax. If the sum of these taxes exceeds the maximum potential tax burden, the royalty must be adjusted to the maximum burden limit.
For those mining entities with a production of up to 80,000 MT (considering their average annual sales for the last 6 years), the maximum potential tax burden would be 45.5%.
3.- All mining royalty taxpayers are required to report their financial statements on a quarterly basis, including a note on the ownership of the entity, to the Commission for the Financial Market.
4.- The elimination of the specific mining tax (“IEAM”, currently contained in articles 64 bis and 64 ter of the Income Tax Law) is proposed.
5.- Entry into force: January 1st, 2024.
Taxpayers subject to tax invariability will not be affected by these changes (i.e., will continue to be subject to the IEAM) until the date on which the tax invariability ends. However, they will be able to voluntarily apply the new regulation in advance.
