Duties, royalties and taxesDuties, royalties and taxes payable by private parties
What duties, royalties and taxes are payable by private parties carrying on mining activities? Are these revenue-based or profit-based?
Private parties carrying out mining activities in Finland are subject to income taxes, value added tax (VAT) and exploration and excavation fees payable to the landowners. Also, private parties have to pay possible transfer tax and real estate tax in the event that such a party acquires real estate in Finland.
Income tax is payable on the party’s taxable income, calculated in accordance with the relevant tax regulations. Currently, the corporate income tax rate is 20 per cent.
VAT is payable on sold goods and services, unless such goods and services fall under a specific exception. The general VAT rate for goods and services is currently 24 per cent, but there are some exceptions relating to certain products and services. VAT is payable by the seller; however, the seller may deduct the input VAT of purchases of goods and services for business purposes, if another VAT taxpayer has supplied them. Should the amount of VAT paid by the VAT taxpayer for the goods and services purchased for the business operation exceed the amount of VAT payable for the sales of goods and services, the VAT taxpayer will be refunded the excess, provided that the purchased goods and services relate to business activities from the sales of which VAT is payable.
The holder of an exploration permit shall pay annual compensation (exploration fee) to the owners of land included in the exploration area.
The annual amount of the exploration fee per property is:
- €20 per hectare for each of the first four years of validity of the exploration permit;
- €30 per hectare per year for the fifth, sixth and seventh year of validity of the exploration permit;
- €40 per hectare per year for the eighth, ninth and 10th year of validity of the exploration permit; and
- €50 per hectare per year for further years of validity of the exploration permit.
The exploration fee for the first year has to be paid within 30 days of the date the exploration permit gains legal force. The fee for the following years is paid at the anniversary of the first payment.
In addition to the exploration fees, the exploration permit holder has to compensate the landowners and owners of the water areas for all damages caused by the exploration work carried out by the exploration permit holder within the exploration permit area. The exploration permit holder has to deposit a collateral for the purpose of offsetting potential damage and inconvenience and performing after-care measures, unless this is deemed unnecessary in view of the quality and extent of the operations, the special characteristics of the operating area, the permit regulations issued for the operations and the applicant’s solvency. The collateral is issued separately for each exploration permit.
Based on TUKES’ decisions, the amount of the collateral tends to be set as follows:
- €2,000 if the exploration area is less than 1,000 hectares;
- €2,500 if the area is between 1,000 and 1,999 hectares;
- €3,000 if the area is between 2,000 and 3,999 hectares; and
- €4,000 if the area is at least 4,000 hectares.
Should test mining or other similar exploration activities using heavier machinery already be planned in the exploration phase, the collateral is likely to be higher than that mentioned above.
Under the previous Mining Act, if the owner of land requested, the claim holder had to provide to the landowner in question a collateral before the commencement of the exploration work. Many landowners, however, did not require a collateral, so in real terms the new Mining Act has meant increased obligations to exploration companies. To date, TUKES has never resorted to the collaterals.
Concession and mining fees
If the mining permit holder does not own the surface rights to the mining area (as sometimes is the case), the mining permit holder has to pay an annual compensation (excavation fee) to the landowners.
The amount of the excavation fee per property is €50 per hectare per year. In addition to that, the excavation fee has a variable part of 0.15 per cent of the calculated value of mining minerals included in the metal ores that are excavated and exploited in the course of the year. The calculation is based on the average price of the exploited metals included in the ore during the year and the average value of other products exploited from the ore during the year.
If the permit authority postpones the expiry of the mining permit (before mining activities have started or if they have been suspended) the excavation fee is doubled to €100 per hectare until mining activities commence or resume.
The obligation to pay an excavation fee starts when the mining permit becomes legally valid. The obligation to pay elevated compensation starts when the decision on the new date for commencing mining activity, or continuing activities, become legally valid.
For the purpose of the verification of the excavation fee, the mining permit holder has to submit the relevant information to the mining authority no later than on 15 March in the year following the year for which the fee is to be paid. The mining authority confirms the amount of the excavation fee annually.
The excavation fee must be paid no later than 30 days from the date TUKES’ decision on the fee enters into force.
The Government Decree on Mining contains more specific provisions on the grounds for determining the excavation fee as well as on the information to be submitted to TUKES for the purpose of confirming the fee.Tax advantages and incentives
What tax advantages and incentives are available to private parties carrying on mining activities?
There are certain government subsidies available for development areas in Finland.Tax stablisation
Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?
Finland is a country of low political risk, so no stabilisation agreements are available. The permitted range of VAT is subject to EU laws.Carried interest
Is the government entitled to a carried interest, or a free carried interest in mining projects?
No.Transfer taxes and capital gains
Are there any transfer taxes or capital gains imposed regarding the transfer of licences?
When only permits (licences) are transferred, the transaction can be subject to VAT (which the purchaser of the permits can in many cases deduct (see question 19). Further, the profit made in connection with the selling of the licences is subject to capital gains tax, which, for companies other than corporations, is currently 30 per cent for a capital gain not exceeding €30,000 and 34 per cent thereafter. Capital gains for corporations are usually taxed in connection with their normal corporate taxation. The corporate tax rate is currently 20 per cent.
When, for instance, a junior company is acquired by a mining company through a share transaction, the transaction is usually subject to a 1.6 per cent transfer tax and can result in capital gains taxation on the profit that the sellers of the shares make. However, if the junior company whose shares are being sold is owned by a foreign parent company and neither the junior’s parent company nor the purchaser have permanent establishment in Finland, the share transaction is exempt from transfer tax.Distinction between domestic parties and foreign parties
Is there any distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign parties?
There is no such distinction. However, see question 13.