PHILIPPINES Trends and Developments Contributed by: Patricia A O Bunye and Rafael Raymundo A Evangelista, Cruz Marcelo & Tenefrancia
about 5% have been explored and mining con - tracts cover only about 3% of these areas. The untapped potential of the mining sector to con - tribute to national development is partly due to the uncertain and complex fiscal mining regime. It will be recalled that on 26 September 2023, House Bill No 8937 (HB No 8937), or the pro - posed New Fiscal Regime for the Mining Indus - try, passed the third and final reading at the House of Representatives. Under HB No 8937, four new sections were incorporated in Republic Act No 8424, otherwise known as the National Internal Revenue Code of 1997, as amended. Under HB No 8937, the fiscal regime for large- scale metallic mining operations is bifurcated; ie, large-scale mining operations: (i) within min - eral reservations; and (ii) outside mineral reser - vations. The proposed tax rate for large-scale mining operations within mining reservations is a flat 4%, while the tax rate for those outside min - ing reservations is graduated and margin-based (which is the ratio of income to gross output). It bears emphasis that, for the latter, despite being a graduated rate, the maximum royalty rate is 5%. Further, for large-scale mining operations within mining reservations, tax is imposed on gross output, while for those outside mineral reserva - tions, tax is imposed on income (ie, gross out - put less deductions). Notably, for large-scale mining outside mineral reservations, expenses for the development of host and neighbouring communities and for the development of geo - sciences and mining technology may be claimed as deductions. HB No 8937 also proposes wind - fall profits tax and ring-fencing, among metallic mining operations.
In the Senate, Senate Bill No 2826 (SB No 2826), entitled Enhanced Fiscal Regime for Large- Scale Metallic Mining Act, is pending for sec - ond reading before the plenary. The bill seeks to levy royalties on all mining operations, whether inside or outside mineral reservations, as well as a windfall profits tax to capture extraordinary gains from high commodity prices. It also pro - poses to consolidate the tax treatment of mining operations under a Mineral Production Sharing Agreement (MPSA) and of those under Financial and Technical Assistance Agreement (FTAA) to create a single tax structure. The bill also introduced a provision that restricts thin capitalisation by setting a maximum debt- to-equity ratio for the tax deductibility of interest expense, and ring-fencing, where each mining operation of a mining contractor or operator with multiple operations will be treated as a separate taxable entity. A mechanism for public disclo - sure and scrutiny of extractive industry-related data and information to help ensure the open and accountable governance of the country’s mineral resources pursuant to international standards and best practices is provided for. Proponents of SB No 2826 believe that the pro - posed new fiscal regime for the mining industry represents a critical step in reforming the sec - tor to ensure that the country’s mineral wealth is harnessed responsibly and equitably for the benefit of the present and future generations while striking a balance between increasing gov - ernment revenues consistent with state owner - ship of mineral resources and maintaining com - petitiveness, attractiveness and sustainability of the mining industry. Once the counterpart measure in the Senate is passed on third and final reading, the two ver - sions from both Houses of Congress will be
412 CHAMBERS.COM
Powered by FlippingBook