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Tax Stability in the Mining Industry

Juan Pablo Menna and Agustina de Abaroa

Baker McKenzie


This chapter will focus on the tax stability benefit for the mining industry in Argentina in comparison with other jurisdictions.

Despite political and social instability, mining activities in South America have increased during the past few years, and the trend for the coming years seems to be positive in view of the rise in commodity prices, especially those of metals.

Specifically, Argentina has achieved in recent years a user-friendly investment regime and, along with its promising geological conditions, the country has become a popular destination for mineral investors. Indeed, the mining activity in Argentina has grown in the past few years, being nowadays one of the most important industrial activities in the country.

Nonetheless, in comparison with neighbouring countries, mining activity in Argentina has fallen behind regarding the effects of the activity on the GDP.2

Based on certain statistics,3 approximately 75 per cent of Argentine territory with potential mining resources is still unexploited. Therefore, there is an enormous potential for development in mining activity in Argentina. However, mining is a high-risk activity that requires major capital investments and long recovery periods of such investments.

According to the projections made by the current administration, large-scale exploitation of gold, silver, copper and lithium in the country would require investments between US$300 million and US$500 million per year.

In this regard, the investment environment of mining countries depends essentially on the expected rate of return the country offers to investors and the level of risk associated with the mining projects.

Since the aforementioned factors may vary depending on the country’s geological potential, political stability, tax regime and government regulations it is crucial for the investors in the region to have a protection against changes in local regulations that may affect their investments.

Therefore, the purpose of this chapter is to analyse the main aspects of the guarantee of tax stability in Argentina. It will also analyse how the tax stability regime works in other jurisdictions of the region, and the aspects to be taken into account so that a guarantee provides the investor a real protection against the frequent changes in such jurisdictions’ regulations.

The Mining Investment Law No. 24,196

Mining activity in Argentina is regulated by the Constitution, the Argentine Mining Code4 and several federal laws, executive orders, resolutions and regulations that apply specifically to this activity. Mining activity is also governed by the local legislation enacted by each of the Argentine provinces.

Procedures for obtaining mining rights (exploration permits and exploitation concessions) are mainly regulated by the Argentine Mining Code and the provincial mining procedural codes.

Moreover, in Argentina the federal state and the provincial states are the owners of first-category minerals (such as gold, copper, silver and other hard minerals) located in their respective territories. Nevertheless, except for certain specific cases, federal and provincial governments are prevented from exploring and exploiting mining areas, and must grant to private parties the right to search for and exploit mineral resources. In light of this, provincial governments are entitled to enact their own mining legislation. However, such provincial legislation shall not be contrary to federal legislation.5

Pursuant to the Argentine Mining Code, mining rights are mainly divided into exploration permits and exploitation concessions. Since ownership of surface land is not included in these exploration permits and exploitation concessions (apart from certain exceptions), permit and concession holders need to negotiate access agreements with the owner of the surface land. If surface access is unreasonably withheld, the holders may apply for easements.6

In order to promote mining activity and guarantee foreseeability and stability, in 1993, Argentina enacted the Mining Investment Law No. 24,196,7 which contributed to the growth of mining activity in Argentina.

In effect, since the enactment of the Mining Investment Law, mining activity in Argentina has grown rapidly, becoming one of the major industries in the export sector and attracting important investment and infrastructure projects for the country.8

The Mining Investment Law creates an investment regime for persons or entities domiciled in Argentina that develop mining activities. This regime is also applicable for the provinces that decided to adhere to the federal investment regime, and for the municipalities of such provinces. Since the enactment of Law No. 24,196, the main mining provinces have adhered to it, allowing a more suitable legal framework granting tax benefits for the mining industry.9

Additionally, the benefits provided in the Mining Investments Law are as follows:

  • total tax burden stability for 30 years as from the filing of the feasibility study;
  • special income tax deduction of all the amounts invested in prospection, exploration and special studies, and mineralogical, metallurgical, pilot plant and applied research essays, and other work intended to determine the technical and economic feasibility of the projects;
  • tax on personal assets exemption;
  • accelerated amortisation system for income tax purposes of capital investments incurred in executing new mining projects and expanding the existing ones;
  • exemption from the payment of customs duties related to the entry of capital goods and special equipment (or components of such assets) determined by the enforcement agency, as required to undertake the activities regulated by this system;
  • a system to request VAT credits resulting from imports and purchases of goods and services intended for use in mining activities: prospection, exploration, metallurgical essays and applied research;
  • royalties for the exploitation of the mine requested by the provinces adhering to this regime should not exceed 3 per cent of the value of the mineral extracted at the mining pit; and
  • the companies provision for environmental expenses may be deducted for income tax purposes.

Tax stability in Argentina

Investments in new mining projects and the existing ones that increase their production are protected by Law No. 24,196 and, therefore, benefit from tax stability for a term of 30 years as from the filing of the feasibility study.

Tax stability means that companies’ tax burden, as determined at the time of filing the feasibility study, cannot be increased as a result of changes in federal, provincial or municipal taxes and rates. This regime is applicable to all taxes – except VAT – that are imposed on a beneficiary mining entity, as well as to the duties, tariffs or other taxes on imports or exports.

After the feasibility study is filed, the tax authority should issue a certificate with the federal and provincial taxes, as well as the municipal fees applicable at the time of the filing of the study, and should send that certificate to the corresponding tax authorities. Therefore, tax stability in Argentina, unlike other counties, is given once the feasibility study is filed and the tax certificate is issued. Hence, no tax stability agreement is executed.

Under this regime, the law guarantees that the qualified company will not be subject, for 30 years, to a total tax burden higher than the one existing at the time of the feasibility study.

Section 8 of the Mining Investments Law stipulates that tax stability includes all taxes, such as direct taxes, fees, contributions, and export and import taxes. VAT is excluded from the tax stability clause.

The tax stability regime in Argentina is fulfilled provided that the total tax burden is not increased. Consequently, the benefit works as a cap; thus, if taxes are eliminated or reduced, the qualified company will benefit from those changes. In other words, a particular tax may be increased – or a new tax may be created (or both) – but, if the effect of such increase – or new tax – is compensated in that same jurisdiction through the elimination or reduction of other taxes or tax amendments favourable to the taxpayer, the tax stability guarantee will not be affected.

The modification of the tax burden refers to the creation of new taxes, the increase of tax rates, the amendment of the tax assessment procedure – such as the elimination of exemptions or deductions, the incorporation of new situations that trigger the tax, the elimination or modification of a regulation that implies the application of taxes to situations that were not taxed at the time of the feasibility study – and the modification of the income tax rate or the tax assessment applicable to foreigner beneficiaries for the interest arising from the loan when the Argentine entity agreed to burden the income tax payment.

However, the following situations shall not be covered by the tax stability regime or violate such tax stability:

  • changes in the valuation of assets, when such valuation forms the base for the tax’s application and assessment;
  • the extension of regulations applicable for a specific period in force during the filing of the stability study;
  • the expiration of exemptions applicable for a specific period and that were in force during the filing of the stability study;
  • the incorporation of a new tax normative that entails further controls and verification mechanisms to avoid the improper reduction of taxes; and
  • social security contributions.

Tax stability also applies to the regulations and customs duties rates, excluding the reimbursement or refund of taxes that, as export benefits, may be applicable whenever definitive exports are made.

During recent years, taxpayers have challenged the practical application and extension of the stability regime. In this context, the Argentine Federal Supreme Court (the Supreme Court) has settled its position regarding some controversial issues related to this.

Tax stability

The application of equalisation tax

Before the Income Tax amendment, published in the Argentine Official Gazette on 29 December 2017,10 a corporate income tax at a rate of 35 per cent11 was imposed on Argentine legal entities and branches, and other permanent establishments doing business in Argentina. An additional 35 per cent withholding tax was applied, after making certain adjustments, to the distributions of profits not subject to the 35 per cent corporate income tax at the corporate level (equalisation tax).12

In this scenario, the mining company Cerro Vanguardia questioned in court the application of the equalisation tax applicable to fiscal year 2000, arguing that such tax was incorporated after obtaining the tax stability and, thus, was not applicable to the taxpayer. Conversely, the federal tax authority alleged that tax stability benefits were only applicable to the entity that requested such regime, but was not extended to the shareholders of Cerro Vanguardia. Therefore, according to the federal tax authority, as equalisation tax was imposed over the profits of the shareholders once dividends were distributed, the stabilisation tax benefit did not apply to these situations.

The Federal Tax Court13 and the Court of Appeal rejected the taxpayer’s arguments, confirming the Federal Tax Authority position.14 However, the Supreme Court15 reverted the Court of Appeal sentence and confirmed Cerro Vanguardia’s defence arguments.

In its ruling, the Supreme Court highlighted that the tax stability regime’s aim was to give the investors tax stability and foreseeability in order to promote mining activity, which is a high-risk activity with long-term recovery of capital investments. In this context, the Supreme Court informed that the stability regime needs to be given a normative analysis and not one from a literal standpoint. In this context, the Court concluded that the aim of the law is to give the mining investors a stable and foreseeable regime in order to promote its investments in Argentina and, applying an equalisation tax – not legislated when the stability was obtained – to the distribution of dividends would imply a higher tax rate for income tax purposes. In other words, the Supreme Court concluded that the application of the equalisation tax would increase the total tax burden of Cerro Vanguardia and, thus, would be against the stabilisation regime obtained by the taxpayer.

In this leading case, the Supreme Court set aside the corporate principle that separates the entity from its shareholders, and concluded that what prevailed in this case was the tax stability principle regulated in Law No. 24,196. Thus, this important Supreme Court precedent awards stability not only to the corporate entity but also to its shareholders, protecting the real mining investors in order to fulfil the commitment stipulated in the stability regime.16

Taxpayer’s burden of proof

A judicial case analysing the tax stability regime applicable to export duties

As mentioned, export duties are included within the tax stability regime. Thus, from a legal standpoint, once the tax stability is granted, any increase or creation of new export duties, or both, should not apply to the project that received the stability, as long as such increase entails a higher tax burden applicable for the taxpayer.

Export duties are calculated on the tax base described below and at the rate currently in force when the definitive export declaration is filed before the customs office.

Export duty tax base is defined by the Customs Code as a theoretical free on board value of a sale between independent parties, and includes the addition of expenses such as commissions and brokerage, among others. If the price was agreed between related parties, the importer shall provide evidence that the price was not influenced by such relation, usually by means of a transfer pricing report. In any case, customs could determine the tax base for customs valuation purposes.

The Supreme Court analysed the application of export duties in light of the tax stability regime in the leading case Minera del Altiplano SA.

In effect, export duties for certain commodities17 were introduced by Decree No. 310/2002 and the Ministry of Economy’s Resolution No. 11/2202. However, according to the Federal Customs’ General Instruction No. 19/2002, all the exporters benefiting from the tax stability of Law No. 24,196 (section 8) were excluded from the payment of such export duties.

Such criterion remained valid until 2007 when the Secretariat of Mining and the Secretariat of Domestic Commerce determined that export duties were also applicable to exporters benefiting from the tax stability of Law No. 24,196, and therefore applicable to the claimant of the case.

In such context, Minera del Altiplano SA initiated a judicial pleading – amparo – in order to request the judge to declare that the referred export duties should not apply to it based on the tax stability regime regulated in Law No. 24,196. Although the First Circuit judge18 and Salta’s Federal Court of Appeals19 confirmed the taxpayer’s arguments – concluding that the export duties increase was not applicable to Minera del Altiplano SA – the Supreme Court, based on the opinion of the Office of the Attorney General20 rejected the taxpayer’s request.

The Office of the Attorney General highlighted that the spirit of the stability regime was not to grant the taxpayer an exemption from new taxes or the increasing of existing ones. Indeed, according to the Office of the Attorney General, the aim of the tax stability regime regulated in Law No. 24,196 is to grant tax stability and a cap for the total tax burden applicable at the time of the filing of the feasibility study. Moreover, the leading case emphasised that, according to article 8(5.1) of Law No. 24,196, the beneficiary carries the duty to prove the increasing of the total tax burden and request the reimbursement of the paid tax that generated such increase.

In conclusion, the importance of this leading case is that it highlights and confirms two major procedures arising from the tax stability regime: (i) that the beneficiary is burdened with the duty to prove the rise of the total tax burden; and (ii) that the proper procedure is to pay the taxes and, afterwards, to request the reimbursement of the tax that infringed the stability regime. Hence, the Supreme Court did not deny the right of the mining company to request compliance with the stability regime, but stressed that the taxpayer should comply with the regulated procedure and prove the infringement of the granted stability regime.21

Tax stability in the region

The cases of Chile and Peru

Chile

In Chile’s history, mining has consistently been a leading industry in the country, namely in copper mining.22 The growing of the mining industry has been supported by a successful government policy to attract foreign investment.

Over almost four decades, foreign investment was promoted and protected under the regime created by Decree Law No. 600 of 1974 (DL 600), enacted during the government of Pinochet.

DL 600 established a tax stability regime that provided access to the official foreign exchange market, and granted certain benefits to the foreign investors such as the following:

  • the option of invariable income taxation at a rate of 42 per cent for 20 years;
  • invariable VAT and customs duties on the import of capital goods;
  • the option of no variation in the mining tax for 15 years; and
  • an alternative mechanism of calculating tax costs in a foreign currency.

Under DL 600, a foreign investor needed to enter into an agreement with the Chilean government (through the Foreign Investment Committee) every single time it made an investment in the country.23 Indeed, the foreign investors that met the requirements set forth by DL 600 were requested to file an investment petition, which, once approved, was reflected in a foreign investor agreement.

As mentioned above, the agreement granted certain guarantees to foreign investors, who were only required to make the investment in the mining project once the agreement was signed with the Foreign Investment Committee and within a term of eight years from the execution of the agreement.

Although this procedure created certain layers of bureaucracy and additional costs for investors, the framework of DL 600 allowed foreign investors to make investments in the country under a tax stability scenario, which not only encompassed income tax and VAT but also mining tax and customs duties on the import of capital goods for the development of mining projects.

Nonetheless, DL 600 was abrogated as a result of the comprehensive tax reform enacted by Law No. 20,780 in 2014.24 In such a context, on 16 June 2015 the Chilean Federal Congress enacted Law No. 20,848 (the New Regime), which sets forth a new legal framework for foreign direct investments in Chile as from 1 January 2016.25

The New Regime includes a definition of direct foreign investment, which involves any transfer of foreign capital or assets into Chile, owned by a foreign investor or controlled by it, in an amount equal to or higher than US$5 million, through the transfer of freely convertible foreign currency; the contribution of physical assets; the reinvestment of earnings; the capitalisation of credits; or the transfer of technology that may be capitalised or credits associated with foreign investments from related parties.

In addition, the New Regime sets forth certain rights for the foreign investor: (i) to send abroad the transferred capital and the net profits generated by the investment, upon fulfilment of the relevant tax obligations; (ii) access to the banking exchange market to settle or obtain foreign currency; and (iii) not to be discriminated against when compared to domestic investors (ie, guaranteeing foreign investors the same treatment as local investors before the law, such as in tax disputes or expropriation compensations- among other benefits).26

One of the main advantages of the New Regime is that under the current regulations, foreign investors are entitled to the aforementioned rights without requiring authorisation from any foreign investment regulatory entities.

However, the New Regime eliminates certain rights granted under DL 600, such as the opportunity to agree a fixed tax amount over a given term with the Chilean government (eg, including invariable income, the invariable mining tax and the possibility of calculating tax costs in a foreign currency). In this regard, the New Regime specifically sets forth that foreign investors that signed foreign investment agreements with the Chilean government under DL 600 may request a foreign investment authorisation for a term of four years (the transitional period) to preserve all rights and obligations thereunder, provided that the agreements were signed before 1 January 2016.

Under the referred authorisation, foreign investors will enjoy the following rights and have the following obligations during the transitional period:

  • the right to execute the investment through any of the procedures established by DL 600;
  • an invariable income tax rate for 10 years, limited to an aggregate rate of 44.45 per cent;27 and
  • invariable taxation for 15 years for investments allocated to mining projects of a value of US$50,000 or more.

These investors will have the right to invariability – under the rule of law effective from the date of signature of the foreign investment agreement in regard to the specific mining tax – to any new mining taxes, or changes in the amount or form of calculation of mining exploration and exploitation permits.

In other words, foreign investors are entitled to choose to enter into the foreign investment contracts set forth in DL 600 – though with limited benefits in form in which the investment can be made and tax invariability – until the end of the transitional period, which will end on 1 January 2020.

Peru

Peru is the third-largest producer of copper and silver, and the sixth-largest producer of gold, and also produces considerable amounts of lead, tin, zinc and molybdenum.

Under Peruvian legislation, investors in mining projects are entitled to enjoy certain rights and guarantees upon making investments in the country. Regarding the tax stability benefit, current regulations allow investors to protect themselves from changes in Peruvian law by resorting to two kinds of stability agreements: (i) general stability agreements under the general Peruvian legal regime created by Legislative Decree No. 662 (DL 662);28 and (ii) mining stability agreements, which grant tax, exchange control and administrative stability for a specific mining project to the investor. Mining stability agreements are governed by the Peruvian General Mining Law (GML).29

The general stability agreement is a civil contract that has the force of a law and guarantees continued application of certain laws and regulations in force at the execution date. In order to execute a general stability agreement with the Peruvian government, investors are required to guarantee an investment of no less than US$5 million in any sector, except in mining and hydrocarbons.30

Under the general regime, foreign investors are granted the following guarantees:

  • stability of the income tax regime (ie, the guarantee of a fixed income tax at corporate level);
  • free disposal of foreign currency;
  • free remittance of profits, dividends, capital and other income;
  • a favourable exchange rate in the market; and
  • non-discrimination of treatment between foreign and domestic investors.

In order to qualify for the benefit, foreign investors must invest at least US$10 million into a business established in Peru or into high-risk investments in Peru, with the effect of directly generating more than 20 permanent jobs and at least US$2 million of export income within three years following the signing of the general stability agreement.

As mentioned above, in addition to general stability agreements, local and foreign investors in mining projects are entitled to execute guarantee agreements and investment promotional measures (mining stability agreements) with the Ministry of Energy and Mining (MINEM), on behalf of the Peruvian government.

Similar to general stability agreements, mining stability agreements have the force of law and protect investors from changes in certain regimes, laws and regulations for a 10-, 12- or 15-year term – as from the date of the execution or expansion of the investment – depending on the investment and level of production, as applicable.

Companies conducting mining activities that start, or are, carrying out operations above 350 tons per day up to a maximum of 5,000 tons per day, may enter into a 10-year stability agreement. Additionally, companies that undertake an investment commitment of at least US$20 million, may also enter into the stability agreement (the stability regime would be in force as of the date in which the full investment is met). Companies can choose to benefit from the stabilised regime in advance for a maximum period of three years, within which the minimum investment shall be reached. Such advanced term shall be deducted from the 10-year term.31

Companies with a starting capacity of over 5,000 tons per day, or with expansion projects underway aimed at reaching a capacity of over 5,000 tons per day, may enter into a 12-year stability agreement. Additionally, companies that undertake an investment commitment of at least US$100 million (for the commencement of the mining activities) or US$250 million (for already existing mining companies carrying out expansion projects) may also enter into the stability agreement (the stability regime would be in force as of the date in which the full investment is met). Companies can choose to benefit from the stabilised regime in advance for a maximum period of eight years, within which the minimum investment shall be reached. Such advanced term shall be deducted from the 12-year term.32

Companies with a starting capacity of over 15,000 tons per day or with expansion projects underway aimed at reaching a capacity of over 20,000 tons per day, may enter into a 15-year stability agreement. Additionally, companies that take on an investment commitment of at least US$500 million may also enter into a stability agreement (the stability regime would be in force as of the date in which the full investment is met). Companies can choose to benefit from the stabilised regimen in advance for a maximum period of eight years, within which the minimum investment shall be reached. Such advanced term shall be deducted from the 15-year term.33

From a tax perspective, under general stability agreements investors are only entitled to obtain stability on the income tax applicable regime. However, mining stability agreements allows investors to protect themselves from any changes in the income tax system, compensation, the tax refund regime, duties, consumption taxes – except for the tax rate – and the special regime for tax returns.34

Unlike the Argentine tax stability regime, in Peru the stability protection under a mining stability agreement is granted once the investor files an investment plan with the MINEM. The stability guarantee will start as of the date of accreditation of execution of the investment.

Investors in mining activities are entitled to execute both kinds of agreement (ie, the general stability agreement with the Private Investment Promotion Agency of Peru, and the mining stability agreement with the MINEM, at the same time in order to benefit from both regimes).35

Finally, companies that are protected by a tax stability agreement in Peru are charged with a special mining tax. This tax is levied between the 2 per cent and 8.4 per cent on operational profit from sales of metal minerals, and can be deducted from the Peruvian Corporate Income Tax.36

Final comments

In conclusion, a lesson that developing countries should learn from developed countries is that the successful development of mining activity depends mainly on the legal certainty protection provided to the investor.

Taking into account the economic and legal volatility in the countries from the region, the guarantee of tax stability stands as an essential tool with the purpose of protecting the mining investment from incidences of regulatory changes that may occur over the duration of the mining project.

As shown in this analysis, in Argentina such guarantee of tax stability is stipulated by law, whereas in Chile and Peru the investor must enter into an agreement with the state in order to qualify for the benefit of tax stability.

Apart from the debate about which one of the aforementioned systems – statutory or contractual tax stability – offers a higher grade of protection, the fact is that, in practice, such countries have not always respected the application of the guarantee of tax stability – in Argentina, through the creation of export rights on certain commodities by the previous administration, and in Chile and Peru through the renegotiation of the tax stability agreement by the government.

In Argentina, the main obstacle for being fully protected with the tax stability provision is that, in practice, whenever there is an increase in the applicable tax rates or an introduction of a new tax, the investor is the one who must prove the actual increase in the tax burden existing at the date of the presentation of the feasibility study. Such situation has caused a myriad of judicial conflicts with an unfavourable outcome for the investor.

Therefore, any amendment to current regulations of mining investments in Argentina should consider certain adjustments so that the tax stability regime does not remain an empty promise. A possible solution could be to modify the scope of the current law provision – which allows the state to increase the applicable rates and create new taxes as long as other taxes are eliminated so as to compensate such increase – by a mechanism that directly allows the investor to apply the tax regime that was in force on the date of filing the feasibility study during the development of the mining project, without having the burden of demonstrating the increase of the tax burden every time there is a modification to the applicable tax rates.

Footnotes

[1]     Juan Pablo Menna is a partner and Agustina de Abaroa is an associate at Baker McKenzie.

[2]     In developing countries like Chile and Peru mining also constitutes 10 per cent of their GDP. However, in countries like Argentina, it amounts to 4 per cent of the GDP.

[3]     Ameriso C, Benitez E, Gagliardini G, Raffo A, ‘Taxation and Environment in Argentina. Impact of Mining’, https://www.fcecon.unr.edu.ar/web-nueva/sites/default/files/u16/Decimocuartas/ameriso_y_otros_fiscalidad_y_medio_ambiente_en_argentina.pdf.

[4]     Law No. 1,919 – the Argentine Mining Code (http://servicios.infoleg.gob.ar/infolegInternet/anexos/40000-44999/43797/texact.htm).

[5]     Baker McKenzie, Latin America Mining Handbook 2016.

[6]     ibid.

[7]     Law No. 24,196 – the Mining Investment Law (http://servicios.infoleg.gob.ar/infolegInternet/anexos/0-4999/594/texact.htm).

[8]     D’Onofrio, Alejandro C, ‘La situación actual de la estabilidad fiscal y cambiaria en materia minera’.

[9]     The activities included in the Mining Investments Law are: (i) prospection, exploration, development, preparation and extraction of mineral substances; and (ii) processes of crushing, milling, profitability, pelletisation, sintering, briquetting, primary processing, calcination, smelting, refining, sawing, carving and polishing, provided that these processes are carried out by the same economic unit and regionally integrated with the activities described in (i). Moreover, the Mining Investment Law specifically excludes from this regime the activities related to oil and gas, the industrial process of manufacturing cement from calcination, the industrial process of manufacturing ceramics, and the making of sands and boulder destined for the construction industry.

[10]     Law No. 27,430 (http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/305262/norma.htm).

[11]     As from January 2018, the income tax rate applicable for fiscal years beginning in 2018 and 2019 is 30 per cent, and 25 per cent for fiscal years beginning in 2020.

[12]     As per the income tax amendment – Law No. 27,430 – equalisation tax is no longer applicable for dividends or profits attributable to income accrued in fiscal years starting from 1 January 2018.

[13]     Federal Tax Court, Sala A, Cerro Vanguardia c/ AFIP-DGI s/ apelación, 18 August 2004.

[14]     Court of Appeal, Sala V, Cerro Vanguardia c/ AFIP-DGI s/ apelación, 26 April 2006.

[15]     Federal Supreme Court, Fallos 332:1531.

[16]     Mazzinghi, Marcos, Saravia Frías and María Inés, ‘La estabilidad fiscal en la actividad minera y el impuesto de igualación’.

[17]     Export duties were created for the harmonised tariff codes 2709.00.10, 2709.00.90, 2710.00.11 and 2710.00.99.

[18]     Minera del Altiplano SA c/ Estado Nacional PEN otra s/ amparo, first instance sentence issued by Salta’s Federal Court, dated 19 February 2008.

[19]     Minera del Altiplano SA c/ Estado Nacional PEN otra s/ amparo, Salta’s Federal Court of Appeal ruling, dated 6 May 2008.

[20]     Office of the Attorney General in Minera del Altiplano SA c/ Estado Nacional PEN otra s/ amparo (S.C. M.137, L.XLVI) dated 7 April 2011.

[21]     Simesen de Bielke, Sergio A, ‘Estabilidad fiscal en la minería: precisiones sobre el alcance de la ley 24.196’.

[22]     The 1990s marked the beginning of a boom in Chile’s mining industry. During this period, Chile had one of the fastest growing economies in the world, and mining accounted for 8.5 per cent of the GDP and 47 per cent of exports (source: Encyclopedia of the Nations).

[23]     Under the context of DL 600, to enjoy the tax stability right – among other benefits – the foreign investor was required to enter into an agreement with the Chilean government, represented by the Foreign Investment Committee, which was responsible for approving the entrance of foreign capital, and establishing the terms and conditions of each foreign investment agreement.

[24]     Section 9 of Law No. 20,780, enacted on 26 September 2014 and published in the Chilean Official Gazette on 29 September 2014, set forth the abrogation of DL 600 as from 1 January 2016. After such date, the Foreign Investment Committee is not entitled to celebrate new foreign investments agreements. Nonetheless, agreements already executed under DL 600 will continue to apply in accordance with the regime created by it. Source: Chilean Federal Congress Library https://www.leychile.cl/Navegar?idNorma=1067194.

[25]     The law was published in the Chilean Official Gazette on 25 June 2015. Source: Chilean National Congress Library https://www.leychile.cl/Navegar?idNorma=1078789.

[26]     Investors can also benefit from a complete exemption of VAT for the import of capital assets so long as these assets are used to exploit developments in the mining, industrial, forestry, energy, infrastructure, telecoms and technology sectors; exceed US$5 million in value; and generate income within 12 months.

[27]     The maximum tax rate under the Chilean tax law entering into effect in 2017.

[28]     Legislative Decree No. 662, Peru, 29 August 1991, National Congress, Sections 10–11, 15 and 175, source online: http://www2.congreso.gob.pe/sicr/cendocbib/con4_uibd.nsf/ED760CA3685D01CC05257CC8006B3A10/$FILE/4_DECRETOS_LEGIS_662_ESTABILIDIDAD_JURIDICA.pdf. DL 662 is based on the protection granted by section 63 of the Peruvian National Constitution to foreign investors and ensures the non-discrimination principle, granting foreign investors the same property and intellectual property regulations as national investors.

[29]     ‘Texto Único Ordenado de la Ley General de Minería’, Decreto Supremo No. 014-92-EM, Peru, 3 June 1992, Congreso de la República, source online: http://www2.congreso.gob.pe/sicr/cendocbib/con3_uibd.nsf/89E200B65DCF6DE9052578C30077AC47/$FILE/DS_014-92-EM.pdf.

[30]     For these two specific sectors, the minimum investment required is US$10 million.

[31]     General Mining Law as amended by section 6 of Law No. 30,230, Peru, 12 July 2014, ProInversíon website, http://www.proinversion.gob.pe/RepositorioAPS/0/0/arc/LEY_30230_12072014/LEY30230.pdf%3E.

[32]     ibid, section 6.

[33]     ibid, section 5.

[34]     In addition to the tax stability benefit, under the mining stability agreements, investors are entitled to freely use and move income (in any currency) generated through exports or domestic sales as well as protected with the non-discrimination on exchange rates, free trade of mineral products, and other commerce-related benefits.

[35]     Although most mining investments will try to be protected by the mining stability agreement set forth under the GML – since this particular regime grants a broader range of guarantees – investments that are under US$20 million or that do not involve the handling of 350 metric tons per day will not be covered by the mining stability agreement. Thus, in practice, the general stability agreement is used by smaller and major investors to protect the investments made before the feasibility study, since investments made before the feasibility study are not covered by the mining stability agreement.

[36]     Law No. 29,789, Peru, 28 September 2011, Peruvian National Congress website http://www2.congreso.gob.pe/sicr/cendocbib/con4_uibd.nsf/06D51ADCA0414E3805257F0300710C4D/$FILE/Ley_29789_Ley_crea_ImpuestoEspecial_a_la_Miner%C3%ADa.pdf. However, companies not protected with a tax stability agreement are subject to the special mining contribution created by Law No. 29,790. The special contribution ranges from 4 per cent to 13.2 per cent levied on the operational profits made on sales of metallic minerals. This special contribution is deductible for income tax purposes, and mining royalty payments may be credited against this tax. Law No. 29,790 Peru, 28 September 2011, Peruvian National Congress website http://www2.congreso.gob.pe/sicr/cendocbib/con4_uibd.nsf/D5899EB52CE3855805257C2000558A8C/$FILE/29790.pdf.


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