- August 7, 2018
- Posted by: Atty. James Biron
- Categories: Commercial, Legal News, Tax
Under the proposed tax package 2 Plus, the government plans to strike royalty on all mining operations. Records show that the Department of Finance (DOF) had proposed to impose royalty on all mining contractors for metallic and nonmetallic mining actions. Currently, royalty is imposed only on mine sites that were considered mineral reservations.
For works within mineral reservations, the plan is to impose royalty equivalent to 5%, exclusive of all other taxes of the market value of the gross output of the mineral products produced. For mining operations outside mineral reservations, the plan sets the royalty at 3% yearly during the first 3 years, 4% in the 4th year and 5% starting the 5th year onward.
“Additional government share” is to be paid by mining contractors when basic government share consisting of direct taxes, fees, royalties and other related payments total to less than 50% of their net mining revenues.
The additional government share based on the DOF proposal, would be equal to the difference between the 50% of net mining revenue and the basic government share in the calendar year. The net mining revenue is extracted by subtracting expenses from gross output.
The new mining tax regime will also impose limitations depending on the debt-to-equity ratio on mining contractors’ interest expense deductions.
For an income year, a debt-to-equity ratio of 1.5:1 will not allow a deduction for the interest paid on the part of the debt that exceeded the ratio. For a ratio exceeding 1.5:1, meanwhile, for a taxable year, the deduction will be disallowed if the amount of a contractor’s debt does not surpass the “arm’s length debt value.”
Image source: RMP.ph
