After over four years of processing, the Mining Royalty Law was promulgated on August 3rd, to enter into force on January 1st, 2024. The initiative revokes the Specific Tax on Mining Activity established in article 64 bis and 64 ter of Decree Law 824, creating in its replacement a new tax, called Mining Royalty.
The promulgated Mining Royalty Law contains substantial modifications with respect to the initial approach discussed in the Senate Finance Commission (read full previous note).
The new annual tax will affect mining operators, and is structured on the basis of two components:
1. Ad valorem component: corresponds to the application of a fixed rate of 1%, on the annual copper sales of mining operators, whose annual sales are greater than the equivalent of 50,000 metric tons of fine copper (“TMCF” for its initials in Spanish).
When in a commercial year the adjusted mining operational taxable income (“RIOMA” for its initials in Spanish) is negative, the ad valorem component to be paid will correspond to the positive amount resulting from subtracting the negative amount of the RIOMA from the ad valorem component determined according to the previous paragraph.
2. Component on the mining margin: progressive rate component, applied by sections on the RIOMA of the mining operator. The way to determine the marginal rate, as well as the maximum effective rate to be applied for this component, will depend on the level of average sales of the mining operator in the last six years and on the type of mineral exploited. Thus, the standard distinguishes between:
(a) Mining operators whose annual sales come from over 50% copper and exceed the 50,000 TMCF: the rate will be determined according to the mining operating margin of the respective year, according to the following table:
|Mining operating margin||Maximum effective rate|
|21 – 45||12%|
|46 – 60||26%|
(b) Mining operators whose annual sales do not exceed 50,000 TMCF: the rate will apply in sections, determined by the annual sales value, measured according to the equivalent value of one TMCF, as shown in the following table:
|Value of annual sales in TMCF||Marginal rate||Maximum effective rate|
|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%|
(c) Mining operators whose annual sales exceed 50,000 TMCF, but come from 50% or less of copper: the rate will be determined according to the mining operating margin of the respective year, according to the following table:
|Operational mining margin||Marginal rate||Maximum effective rate|
|36 – 40||8%||5,38%|
|41 – 45||10,5%||5,94%|
|46 – 50||13%||6,65%|
|51 – 55||15,5%||7,45%|
|56 – 60||18%||8,33%|
|61 – 65||21%||9,31%|
|66 – 70||24%||10,36%|
|71 – 75||27,5%||11,50%|
|76 – 80||31%||12,72%|
|81 – 85||34,5%||14%|
As well, the Mining Royalty Law establishes a maximum potential tax burden limit, calculated on the RIOMA, which reaches: (a) 46.5%, in the case of mining operators whose annual sales exceed 80,000 TMCF, and (b) 45.5% for mining operators with sales less than said amount. To determine the maximum tax burden, both the Mining Royalty and the income taxes (first category tax and final taxes) will be considered.
According to estimates by the Ministry of Finance, once in place, the collection from the Mining Royalty could reach an annual amount close to 1,350 million dollars, approximately 0.45% of GDP. The Mining Royalty Law establishes that part of the collection is destined to promote the productive development of the regions of the country, with special emphasis on the communes where activities related to mining are carried out, through the transfer of resources to regional governments and municipalities, and by creating funds earmarked for that purpose.