Mining Royalty Bill

Country / jurisdiction: Chile · Year: 2023 · Status: In force · Level: National · Type: Voluntary

In May 2023, the Commission of Mining and Energy of the Senate approved the Mining Royalty bill, an initiative to establish a mining royalty for the exploitation of copper and lithium. The law was referred to the Constitutional Court and eventually promulgated by the government in August 2023. The decision will transfer tax regulations on mining activity from the Income Tax law to the new Mining Royalty law.

Article 2 of the law establishes the ad-valorem component of a 1% marginal tax rate on annual copper sales for operators that produce more than 50,000 metric tonnes of copper per year. Article 3 establishes a tax rate according the mining operational margin for operators whose annual sales come from more than 50% copper and exceed the equivalent value of 50,000 metric tonnes. This rate fluctuates between 8 and 26% depending on the margin in a given year, and is not applicable when the adjusted mining operational taxable income is negative.

The revenue collected through the royalty will be distributed among the regions of the Chile through three funds with the goal of providing additional support to municipalities with the greatest dependence on the Municipal Common Fund. In total USD 450 million, an amount which represents 36% of the estimated royalty revenues, will be injected into local municipalities.

The Externality Compensation Fund for Mining Communities will receive an annual USD 55 million to benefit communities involved in mining and mining-related activities. These funds will mitigate the negative effects of mining, including tailings and pollution.

The Support Fund for Territorial Equity will receive an annual USD 170 million to benefit the lowest-income communities in the countries.

The Regional Fund for Productivity and Development will receive an annual USD 225 million to benefit regional governments.

Official source: https://www.camara.cl/cms/noticias/2023/05/17/despachan-del-congreso-nacional-proyecto-de-royalty-minero/