PHILIPPINES Law and Practice Contributed by: Patricia A O Bunye and Rafael Raymundo A Evangelista, Cruz Marcelo & Tenefrancia
4. Taxation of Mining and Exploration 4.1 Mining and Exploration Duties, Royalties and Taxes Taxes After the lapse of the income tax holiday granted to the contractor by the Omnibus Investments Code (OIC) and the Corporate Recovery and Tax Incentives for Enterprises Act of 2022 (CREATE Act), the con - tractor pays income tax, which is set at a preferred rate for up to ten years. The contractor is also liable for excise tax on mineral products, value-added tax under the National Internal Revenue Code, customs duties under the Tariff and Customs Code, and local business taxes and real property tax under the Local Government Code. The contractor must likewise pay an annual occupa - tion fee, based on the area occupied, and mine waste and tailings fees. On 5 September 2025, Republic Act No 12253, oth - erwise known as the “Enhanced Fiscal Regime for Large-Scale Metallic Mining Act” (the “Enhanced Mining Fiscal Regime Law”), was signed into law, simplifying and rationalising revenue collection from large-scale mining operations. The new fiscal regime is designed to increase state revenues and promote private sector participation through transparency and accountability. Royalties Contractors shall pay royalties to the ICCs concerned, based on the agreed payment, which may not be less than 1% of the gross output. For MAs and FTAAs over areas covered by small-scale miners, the contractor shall pay royalties to the small- scale miners concerned upon utilisation of the miner - als, depending upon their agreement. Additionally, under the Enhanced Mining Fiscal Regime Law, the royalty rate for large-scale metal - lic mining operations is differentiated based on loca - tion with respect to mineral reservations. Large-scale metallic mining operations within mineral reservations shall be subject to a royalty rate of 5% of the gross
output of the minerals or mineral products extracted or produced. On the other hand, large-scale metallic mining opera - tions outside mineral reservations shall be subject to a margin-based royalty on income based on the fol - lowing rates: (i) a minimum of 0.1% for margin less than or equal to 0%; (ii) 1.0% for a margin over 0% but not over 15%; (iii) 2.0% for a margin over 15% but not over 30%; (iv) 3.0% for a margin over 30% but not over 45%; (v) 4.0% for a margin over 45% but not over 60%; and (vi) 5.0% for a margin over 60%. Government Share The total government share in Mineral Production Sharing Agreements is the excise tax on the mineral product or 4%, based on the actual market value of the gross output thereof at the time of removal. The government’s share in co-production and joint venture agreements shall be negotiated with the con - tractor, considering the capital investment, the risks involved, the contribution to the economy, and other factors for fair and equitable sharing. The government is also entitled to compensation for its other contribu - tions, as agreed upon by the parties, consisting of the contractor’s income tax, excise tax and other taxes, duties and fees provided in existing laws. The government share in an FTAA is negotiated by the government and the contractor and consists, among other things, of the contractor’s income tax, customs duties and fees on imported capital equipment, excise tax on minerals, royalties for mineral reservations and IPs, local business tax, and other national and local government unit taxes, royalties and fees. In addition, the Enhanced Mining Fiscal Regime Law created a windfall profits tax designed to maximise the government’s collection when mining compa - nies earn exceptionally high profits due to favourable market conditions. Large-scale metallic mining opera - tions shall pay an additional windfall profits tax on net income based on the following rates: (i) 1.0% for a margin equal to 30% but not over 40%; (ii) 3.0% for a margin over 40% but not over 55%; (iii) 5.0% for a margin over 55% but not over 65%; (iv) 7.0% for a
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