Mining royalty

On July 11th, 2022, the government presented amendments to the mining royalty bill. The main aspects of the bill 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 a progressive rate applicable on annual copper sales of mining companies, which depends on the price of copper and the annual sales measured in metric tons of fine copper (“MT”), in accordance with the following table:

US$ per pound of copper Annual sales: 50,000 – 200,000 MT Annual sales > 200,000 MT
Marginal rate Effective rate Marginal rate Effective rate
< $2 1% 1% 1% 1%
$2 – $2,5 2% 1,2% 4% 1,6%
$2,5 – $3 2% 1,3% 4% 2%
$3 – $3,5 2% 1,4% 7% 2,7%
$3,5 – $4 2% 1,5% 7% 3,3%
$4 – $4,5 2% 1,6% 7% 3,7%
$4,5 – $5 2% 1,6% 7% 4%
> $5 2% 7%

Mining companies that sell annually an amount equal to or less than 50,000 MT will be exempt from this component.

(ii) Mining margin component, applicable over the adjusted taxable mining operating income.

For those mining companies whose sales come from more than 50% of copper, and exceed 50,000 MT, with rates starting at 2% when the price per pound of copper is equal to or greater than US$ 2.25 and a maximum of 36% when it exceeds US$ 6:

US$ per pound of copper Maximum effective rate
< $2,25 2%
$2,25 – $2,75 4%
$2,75 – $ 3,25 8%
$ 3,25 – $4,25 20%
$4,25 – $5 32%
$5 – $6 36%
> $6 36%

Mining companies that do not comply with the requirements of the preceding paragraph 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 0,5% 0,1%
15.001 – 20.000 1% 0,33%
20.001 – 25.000 1,5% 0,56%
25.001 – 30.000 2% 0,80%
30.001 – 35.000 2,5% 1,04%
35.001 – 40.000 3% 1,29%
40.001 – 50.000 4,5% 1,93%

If the equivalent value of annual sales 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.- The elimination of the specific mining tax (“IEAM”, currently contained in articles 64 bis and 64 ter of the Income Tax Law) is proposed.

3.- 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.

4.- Status of the bill: the amendmentswill be analyzed in particular by the Mining and Energy Committee of the Senate, to then pass to the Finance Committee. The bill will then be voted by the Senate Chamber. If approved, it will require the approval of the Chamber of Deputies for its publication as law.

On October 25th, 2022, the government presented amendments to the mining royalty bill. The main aspects of the bill 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:
    • Ad valorem, consisting of the application of a fixed 1% rate on the annual copper sales of mining companies whose annual sales 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.
    • Mining margin component, applicable over the adjusted taxable mining operating income.

      For those mining companies whose sales 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 sales 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 0,5% 0,1%
15.001 – 20.000 1% 0,33%
20.001 – 25.000 1,5% 0,56%
25.001 – 30.000 2% 0,80%
30.001 – 35.000 2,5% 1,04%
35.001 – 40.000 3% 1,29%
40.001 – 50.000 4,5% 1,93%

If the equivalent value of annual sales 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%
  1. The elimination of the specific mining tax (“IEAM”, currently contained in articles 64 bis and 64 ter of the Income Tax Law) is proposed.
  2. 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.
  3. Status of the bill: the amendments will be analyzed in particular by the Mining and Energy Committee of the Senate, to then pass to the Finance Committee. The bill will then be voted by the Senate Chamber. If approved, it will require the approval of the Chamber of Deputies for its publication as law.