Chile

Chile

Adopts new Mining Royalty Act increasing taxation for large copper mining companies

10 Aug 2023

On 10 August 2023, the Official Gazette of Chile published a new law on mining royalty. Following extensive discussions in Parliament, the President of Chile enacted the law, which introduces a higher royalty tax for major mining companies. This increased tax specifically targets companies with over fifty per cent of their sales in copper and an annual output exceeding 50,000 tonnes of fine copper. Companies producing below this threshold will remain subject to the existing tax regime.

The revised royalty includes a 1 per cent ad valorem tax on annual copper sales and a component based on adjusted operating margins, with progressive rates from 8 to 26 per cent applied to the Adjusted Mining Operational Income (RIOMA). RIOMA is determined by the miners' taxable operating income, factoring in start-up costs, depreciation, and financial expenses. The law specifies a maximum total tax limit, combining corporate tax, withholding tax, and royalties, of 46.5 per cent of pre-tax earnings. For companies producing between 50 and 80 tonnes, this cap is set at 45.5 per cent. Miners with a negative RIOMA are exempt from the ad valorem tax.

The Act will take effect on January 1, 2024.

From this tax, an estimated $1.35 billion is expected to be collected. Of this, $450 million will be allocated across three funds designed to support regional and municipal development. These funds are the Regional Productivity and Development Fund, the Territorial Equity Fund, and the Mining Municipalities Fund.

Nature of measure:
  • Treatment and operation
Type:
  • Treatment and operation (Other)
Industry:
  • Primary (Mining and quarrying)
Inward FDI:
No
Outward FDI:
No
Sources: