PANAMA Law and Practice Contributed by: Roy C Durling, Arias, Fábrega & Fábrega
Since the enactment of the CMR in 1963, con - cessionaires have been expected to contribute the following to the government: • a fixed annual duty for the area comprising mining concessions; and • royalties for the product extracted. Law 13 of 2012 introduced a set of amendments to the CMR, which, inter alia, included a new regime regarding duties and royalties applicable to mining concessions. • In the case of exploration concessions, there is a fixed annual surface tax, ranging from USD1 to USD3 per hectare, with the amount increasing progressively during the term of the concession. • In the case of extraction concessions, the surface tax and royalties will depend on the type of mineral – the surface tax will range from USD1.50 to USD8 per hectare, and the royalties will range from 4% to 8%. Royalties are calculated as percentages of the “gross negotiable production”, which is defined as follows: (a) if royalties are to be paid in kind, the gross mineral production minus produc - tion losses and other minerals extracted that have no commercial value, etc; or (b) in the case of royalties paid in cash, the gross sales receipts minus transportation and other expenses, calculated in accord - ance with the International Financial Reporting Standards. Holders of concessions are also required to post performance bonds. The 2012 amendments to the CMR state that these bonds would range from USD0.10 per hectare for exploration con - cessions to USD0.25 per hectare for extraction concessions.
Performance bonds may be posted in cash or through the delivery of bonds issued by the gov - ernment of Panama or surety bonds issued by insurance companies qualified to do business in Panama. Any payments to the government may be made in US dollars. Failure to pay the government the amounts due under the concession contracts and the law will trigger defaults under the concession contracts, and will give the government the right to ter - minate concessions. The CMR allows a grace period of one year for payment defaults. In prac - tice, third parties (such as creditors) may step in and pay the duties owed to the government. 4.2 Tax Incentives for Mining Investors and Projects In general terms, mining investors do not enjoy tax incentives or benefits that are not otherwise available to investors in other economic activi - ties. However, the CMR exempts equipment and vehicles used in mining operations from import duties. Mining companies that have invested USD2 mil - lion or more may apply for a legal and tax sta - bility regime pursuant to Law 54 of 1998. The stability regime has a ten-year duration. In the case of large and complex projects, it may be worth considering requesting the government to grant the mining concession by means of special legislation (ie, by means of a contract- law). As explained in 1.6 Granting of Mineral Rights , the advantages of such special legisla - tion include the following: • the terms of the concession can be tailored to the project;
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