ECUADOR Law and Practice Contributed by: Roque Bernardo Bustamante and Claudia Bustamante, Flor Bustamante Pizarro & Hurtado
3.4 Energy-Transition Minerals There are no legislative initiatives related to the increasing demand for the so-called energy- transition minerals, such as lithium and nickel, in Ecuador. Political opposition to mining has caused the government to refrain from leading any mining initiative. 4. Taxation of Mining and Exploration 4.1 Mining and Exploration Duties, Royalties and Taxes The main rule originating in the Constitution is that the benefit to the State shall always be high - er than the benefit to the operating company. The benefit to the State is mainly formed of a 12% share of mine profits, a 25% income tax, royalties between 3% and 8%, and 15% VAT. It is important to note that community support or generation of employment is not treated as a benefit for the purposes of satisfying the Con - stitutional rule. The benefit to the operating company is the total amount of sales minus amortisation of invest- ments in accordance with applicable accounting rules, minus all operating costs (it is important to note that contributions to community develop - ment are not tax-deductible), minus all amounts paid in royalties between 3% and 8% on large- scale mining projects, minus 12% profit-sharing currently being paid to the central government and minus 25% of income tax. There is no different treatment for national or foreign investors. While a tax of 5% applies to all transfers of funds from Ecuador abroad, it is exempted for dividends.
is now being developed by ENAMI in association with the Chilean mining company CODELCO. One of the difficult issues to overcome in Ecua - dor is illegal mining. Lately, the government has been making important efforts to combat this, but it has not yet been controlled (see 2.8 Illegal Mining ). The best example of community relations/con - sultation is the Lundin, Fruta del Norte Project that, with a good integration programme with surrounding communities in place, has started production on a large-scale gold mine.
3. Climate Change, Energy Transition and Sustainable Development in Mining 3.1 Climate Change Effects
Climate change is not, in general, a major con - cern for the mining industry in Ecuador. The big issue is community consultations. 3.2 Climate Change Legislation and Proposals Related to Mining No legislation is being passed regarding mining and climate change. What is being discussed is the right of the population, whether indigenous or not, to vote in a referendum or other type of consultation against mining projects. 3.3 Sustainable Development Initiatives Related to Mining Ecuador has many NGOs; some of them promote sustainable development, but most of them sim - ply oppose mining projects, and blocking mining development seems to be their ultimate goal.
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