What types of duties, royalties and taxes mustbe paid by the mining project company as a condition to obtaining or continuinga mining concession? What remedial actions are available to the grantingauthority when such levies are unpaid?
A mining concession requires the payment of an annual fee during the month of March of each year, which is calculated based on the surface of the concession and the amount varies according to the nature of the concession (exploration, exploitation and non-metallic). If the owner fails to pay the mining fee within the corresponding annual period, a judicial procedure to publicly auction the concessions shall be started; this auction may be suspended if the owner makes double payment of the amount due before to the auction.
In addition, mining concessions are subjected to the payment of application fees, annual mining licenses and royalties which amounts depends mainly on the surface of the mining concessions and the quantities extracted.
n 2006, Chilean passed a law approving the Specific Mining Tax (royalty) to be paid by mining companies depending on their production and based on operating margins (sales less direct costs and expenses). At that time, the companies that have entered into a foreign investment agreement (DL 600) accepted an amendment to their tax invariability subject to certain guarantees related to the maximum royalty rate of 4 per cent (instead of a 5 per cent) and accelerated asset depreciation, and a 12-year or 15-year invariability for these new foreign investment contracts, depending on their execution dates.
Later on, to support the country’s reconstruction of damage caused by the major earthquake that hit Chile in February 2010, the government approved a temporary increase in the income tax rate from 17 per cent to 20 per cent. Likewise, jointly with a new maximum for the royalty, it implemented a rate calculation formula in order to associate such tax payment with the mining industry’s cycle.
Therefore, companies with annual sales ranging between 12,000 and 50,000 metric tones of fine copper (exempted below 12,000) will be charged with a marginal rate ranging from 0.5 per cent to 4.5 per cent over the taxable operational mining income; and those with annual sales over 50,000 metric tones of fine copper are subject to an effective tax burden ranging from 5 per cent and 14 per cent over the taxable operational mining income.
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