Simplified, rationalized mining fiscal regime set
The proposed fiscal regime for large-scale mining that is expected to make the local mining industry more competitive and investor-friendly is set to become law.
This, as a copy of the consolidated version of Senate Bill No. 2826 and House Bill No. 8937, or the Enhanced Fiscal Regime for Large-Scale Mining Act, had already been submitted to the Office of the President for Pres. Marcos’ signature.
A copy of the transmittal letter obtained by the Inquirer showed that the House of Representatives sent a copy of the consolidated version last July 31.
The Department of Finance (DOF) had pushed for the measure, saying it delivers “a long-overdue update to the outdated tax structure governing the mining sector.”
“It simplifies the fiscal system, guarantees the government’s fair share of revenues, strengthens environmental safeguards, and provides fiscal predictability and stability for investors—all while promoting responsible and sustainable mineral development,” the DOF said.
The DOF explained that under the current fiscal regime, the obligations of mining groups and companies vary depending on the mining agreement, resulting in a complex tax system.
It likewise only imposes royalty, which is the share of the government from the extraction of the nonrenewable resource, for mines operating within a mineral reservation.
With the proposed measure, the fiscal regime on mining will be simplified by removing the tax distinctions on mining agreements.
Also, it introduces mechanisms to ensure that the government will get its fair share from the extraction of these nonrenewable resources.
More specifically, a margin-based royalty tax on mines operating outside mineral reservations and a windfall profits tax on all mines will be imposed.
Ring-fencing
The bill also introduced a ring-fencing provision to avoid the consolidation of income and expenses of all mining projects by a single taxpayer to prevent cross-project cost offsets.
This is a safeguard against possible deduction of losses from other mining projects from more profitable projects, the DOF said.
It also prescribed a capitalization rule that limits interest deductions from related-party debt, thus reducing opportunities for avoiding taxes.
The measure also requires public disclosure of company-level financial, tax and environmental information. About 40 percent of total government revenues from mining operations will go to host local government units.
The Chamber of Mines of the Philippines (COMP) supports the consolidated version of the bill, recognizing the inevitability of increased tax rates.
“We also see the importance of what this law provides: predictability and consistency in the fiscal framework, which are essential for long-term planning and investment,” COMP chair Michael Toledo said on Monday.
“The new tax regime aligns the Philippines with global mining jurisdictions, making us more competitive and attractive to investors, especially at a time when the demand for critical minerals is surging worldwide,” added Toledo.
The Philippine Nickel Industry Association likewise supported the bill, saying that “a calibrated increase in mining taxation is necessary to ensure fair government revenue and public benefit.”
“In this regard, we reiterate our support for a margins- and windfall-profits based tax structure, which better reflects actual business performance and aligns with international best practices,” it said.
“Fiscal predictability and economic rationality are essential to attract long-term investments and enable the growth of a competitive, responsible mining industry,” it added.
Toledo also said the Philippines needed to develop new mining projects to fully unlock the sector’s growth and ensure stable production in the long run.
“Let us stress though that there wasn’t really much increase in our mineral production; we simply benefited from a global increase in prices,” said Toledo.
“If the government wants to sustain over the long haul the current mineral export levels, we need new mines to come on stream, underpinned by a long-term mineral development strategy for our country,” he added.
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