Duties, royalties and taxes

Duties, 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?

Law 4/2009 obliges IUP and IUPK holders to pay dead rent and royalties. GR 9/2012 requires IUP and IUPK holders to pay dead rent of $2 per hectare per year for the exploration stage and $4 per hectare per year for the operation production stage. IUP and IUPK holders must pay royalties ranging from 1.5% to 6.5% of the sale price of the minerals produced per year. Dead rent and royalties payable by CoW holders are stipulated in the relevant contract.

IUP and IUPK holders are generally subject to:

  • income tax at the rate of 25% of net taxable profit; and
  • value added tax (VAT) of 10% for the delivery of goods or services.

The tax rate for CoW holders is stipulated in the relevant contract.

Tax advantages and incentives

What tax advantages and incentives are available to private parties carrying on mining activities?

GR 18/2015 on Income Tax Facilities for Investment in Certain Business Sectors and/or Located in Certain Areas (as amended) provides that tax allowances for the mining sector are available subject to the fulfilment of certain criteria. Tax allowances include:

  • a reduction of net taxable income up to 30% of the amount that has been invested, in the form of tangible fixed assets including land, prorated at 5% for six years calculated from the commencement of commercial operation;
  • an accelerated depreciation of tangible assets and amortisation of intangible assets;
  • withholding tax on the dividends that are paid to non-residents at the rate of 10%; and
  • an increased loss carryforward period from five years to 10 years.

These allowances are generally applicable to mining activities completed outside Java.

Tax stablisation

Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?

No, there are no tax stabilisation legislation or tax stabilisation agreements in force.

Carried interest

Is the government entitled to a carried interest, or a free carried interest in mining projects?

No, the government is not entitled to a carried interest or a free carried interest in mining projects.

Transfer taxes and capital gains

Are there any transfer taxes or capital gains imposed regarding the transfer of licences?

Under Law 4/2009, a mining licence is not transferrable to another party and there is no provision on transfer taxes or capital gains resulting from the transfer of licences.

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 distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign investment companies. IUP and IUPK holders are subject to dead rent and royalties at rates stipulated by GR 9/2012. In regard to taxes, IUP and IUPK holders are subject to the applicable laws and regulations. For CoW holders, the amount of duties, royalties and taxes payable to the government vary depending on the amounts agreed in the relevant contract.