This chapter focuses on the tax stability benefit for the mining industry in Argentina in comparison with other jurisdictions.

Despite political and social instability, mining activities in South America have increased during the past few years, and the trend for the coming years seems to be positive as regards the rise in commodity prices, especially those of metals.

Specifically, Argentina has achieved a user-friendly investment regime in recent years and, with its promising geological conditions, the country has become a popular destination for mineral investors. Indeed, mining activity in Argentina has been growing and is now one of the most important industrial activities in the country.

Nonetheless, in comparison with neighbouring countries, mining activity in Argentina has fallen behind in terms of the effects on gross domestic produce.[2] Based on certain statistics,[3] approximately 75 per cent of Argentine territory with potential mining resources is still unexploited, so there is enormous potential for development. However, mining is a high-risk activity that requires major capital investment and long recovery periods after such investments.

According to the projections made by the current administration, large-scale exploitation of gold, silver, copper and lithium would require investments of between US$300 million and US$500 million per year. In this regard, the investment environment of mining countries depends essentially on the expected rate of return the country offers to investors and the level of risk associated with the mining projects.

Since the aforementioned factors may vary depending on the country’s geological potential, political stability, tax regime and government regulations, it is crucial for investors in the region to be protected against changes in local regulations that may affect their investments.

Therefore, the purpose of this chapter is to analyse the main aspects of the guarantee of tax stability in Argentina. It also looks at how the tax stability regime works in other jurisdictions in the region, and what needs to be taken into account to ensure that a guarantee provides the investor with real protection against the frequent changes in regulations.

Mining Investment Law No. 24,196

Mining activity in Argentina is regulated by its Constitution, the Argentine Mining Code[4] and several federal laws, executive orders, resolutions and regulations that apply specifically to this activity. Mining activity is also governed by the local legislation enacted by each of the Argentine provinces.

Procedures for obtaining mining rights (exploration permits and exploitation concessions) are mainly regulated by the Argentine Mining Code and the provincial mining procedural codes.

Moreover, in Argentina the federal state and the provincial states are the owners of first-category minerals (such as gold, copper, silver and other hard minerals) located in their respective territories. Nevertheless, except for certain specific cases, federal and provincial governments are prevented from exploring and exploiting mining areas, and must grant to private parties the right to search for and exploit mineral resources. In light of this, provincial governments are entitled to enact their own mining legislation. However, any such provincial legislation should not be contrary to federal legislation.[5]

Pursuant to the Argentine Mining Code, mining rights are mainly divided into exploration permits and exploitation concessions. Since ownership of surface land is not included in these exploration permits and exploitation concessions (apart from certain exceptions), permit and concession holders need to negotiate access agreements with the owner of the surface land. If surface access is unreasonably withheld, the holders may apply for easements.[6]

To promote mining activity and guarantee foreseeability and stability, in 1993, Argentina enacted the Mining Investment Law No. 24,196,[7] which has contributed to the growth of mining activity in Argentina. In effect, since the enactment of the Law, mining activity has grown rapidly, becoming one of the major industries in the export sector and attracting important investment and infrastructure projects.[8]

The Mining Investment Law creates an investment regime for persons or entities domiciled in Argentina that develop mining activities. The regime is also applicable to the provinces that decided to adhere to the federal investment regime and for the municipalities in those provinces. Since the enactment of Law No. 24,196, the main mining provinces have adhered to it, allowing a more suitable legal framework and granting tax benefits for the mining industry.[9]

Additionally, the benefits provided by the Mining Investments Law are:

  • total tax burden stability for 30 years as from the filing of the feasibility study;
  • special income tax deduction of all the amounts invested in prospection, exploration and special studies, and mineralogical, metallurgical, pilot plant and applied research essays, and other work intended to determine the technical and economic feasibility of the projects;
  • tax on personal assets exemption;
  • accelerated amortisation system for income tax purposes of capital investments incurred in executing new mining projects and expanding existing ones;
  • exemption from the payment of customs duties on imports of capital goods, special equipment (or components of such assets) determined by the enforcement agency, as required to undertake the activities regulated by this system;
  • a system to request VAT credits resulting from imports and purchases of goods and services intended for use in mining activities: prospection, exploration, metallurgical essays and applied research;
  • royalties for the exploitation of a mine requested by the provinces adhering to this regime should not exceed 3 per cent of the value of the mineral extracted at the mining pit; and
  • a company’s provision for environmental expenses may be deducted for income tax purposes.

Tax stability in Argentina

Investments in new mining projects and existing projects that increase their production are protected by Law No. 24,196 and, therefore, benefit from tax stability for a term of 30 years as from the filing of the feasibility study.

Tax stability means that companies’ tax burden, as determined at the time of filing the feasibility study, cannot be increased as a result of changes in federal, provincial or municipal taxes and rates. This regime is applicable to all taxes – except VAT – that are imposed on a beneficiary mining entity, as well as to the duties, tariffs or other taxes on imports or exports.

After a feasibility study is filed, the tax authority should issue a certificate stating the federal and provincial taxes, and the municipal fees applicable at the time of the filing of the study, and should send that certificate to the corresponding tax authorities. Therefore, tax stability in Argentina, unlike other counties, is provided once the feasibility study is filed and the tax certificate is issued. Hence, no tax stability agreement is executed.

Under this regime, the Law guarantees that the qualified company will not be subject, for 30 years, to a total tax burden higher than the one existing at the time of the feasibility study.

Section 8 of the Mining Investments Law stipulates that tax stability includes all taxes, such as direct taxes, fees, contributions, and export and import taxes. VAT is excluded from the tax stability clause.

The tax stability regime in Argentina is fulfilled provided that the total tax burden is not increased. Consequently, the benefit works as a cap; thus, if taxes are eliminated or reduced, the qualified company will benefit from those changes. In other words, a particular tax may be increased (or a new tax may be created – or both) but, if the effect of such an increase (or new tax) is compensated in that same jurisdiction through the elimination or reduction of other taxes or tax amendments favourable to the taxpayer, the tax stability guarantee will not be affected.

The modification of the tax burden refers to the creation of new taxes, the increase of tax rates, the amendment of the tax assessment procedure – such as the elimination of exemptions or deductions, the incorporation of new situations that trigger the tax, the elimination or modification of a regulation that implies the application of taxes to situations that were not taxed at the time of the feasibility study – and the modification of the income tax rate or the tax assessment applicable to foreign beneficiaries for the interest arising from a loan when the Argentine entity agreed to take on the burden of the income tax payment.

However, the following situations are not covered by, or violate, the tax stability regime:

  • changes in the valuation of assets, when the valuation forms the basis for the tax’s application and assessment;
  • extension of regulations (applicable for a specified period) during the filing of the stability study;
  • the expiry of exemptions applicable for a specific period and that were in force during the filing of the stability study;
  • the incorporation of a new tax normative that entails further controls and verification mechanisms to avoid the improper reduction of taxes; and
  • social security contributions.

Tax stability also applies to exchange control regulations and customs duty rates, excluding the reimbursement or refunding of taxes that, as export benefits, may be applicable whenever definitive exports are made.

During recent years, taxpayers have challenged the practical application and extension of the stability regime. In this context, the Argentine Federal Supreme Court (the Supreme Court) has settled its position regarding some controversial issues related to this.

Tax stability

The application of equalisation tax

Before the income tax amendment published in the Official Gazette on 29 December 2017,[10] a corporate income tax on a rate of 35 per cent[11] was imposed on Argentine legal entities and branches, and other permanent establishments doing business in Argentina. An additional 35 per cent withholding was applied, after making certain adjustments, to the distributions of profits not subject to the 35 per cent corporate income tax at the corporate level (equalisation tax).[12]

The mining company Cerro Vanguardia questioned in court the application of the equalisation tax applicable to fiscal year 2000, arguing that the tax was incorporated after the company had obtained tax stability and, thus, was not applicable to the taxpayer. However, the federal tax authority alleged that tax stability benefits were only applicable to the entity that adopted the regime, and that this was not extended to the shareholders of Cerro Vanguardia. Therefore, according to the federal tax authority, as equalisation tax was imposed on the profits of the shareholders once dividends were distributed, the stabilisation tax benefit did not apply to these situations.

The Federal Tax Court[13] and the Court of Appeal rejected Cerro Vanguardia’s arguments, confirming the federal tax authority's position.[14] However, the Supreme Court[15] overturned the Court of Appeal sentence and confirmed Cerro Vanguardia’s defence arguments.

In its ruling, the Supreme Court pointed out that the aim of the tax stability regime was to give investors tax stability and foreseeability so as to promote mining activity, which is a high-risk activity with long-term recovery of capital investments. In this context, the Supreme Court stated that the stability regime needs to be given a normative analysis and not one from a literal standpoint. In this context, the court concluded that the aim of the law is to give mining investors a stable and foreseeable regime so as to promote investments in Argentina and, by applying an equalisation tax (not legislated when the stability was obtained) to the distribution of dividends would imply a higher tax rate for income tax purposes. In other words, the Supreme Court concluded that the application of the equalisation tax would increase the total tax burden of Cerro Vanguardia and, thus, would be contrary to the stabilisation regime obtained by the taxpayer.

In this leading case, the Supreme Court set aside the corporate principle that separates the entity from its shareholders, and concluded that what prevailed in this case was the tax stability principle regulated in Law No. 24,196. Thus, this important Supreme Court precedent awards stability not only to the corporate entity but also to its shareholders, protecting the real mining investors so as to fulfil the commitment stipulated in the stability regime.[16]

Taxpayer’s burden of proof

A judicial case analysing the tax stability regime applicable to export duties

As has been mentioned, export duties are included within the tax stability regime. Thus, from a legal standpoint, once tax stability is granted, any increase in export duties, or creation of new duties, or both, should not apply to a project that has been given tax stability, as long as the increase entails a higher tax burden applicable to the taxpayer.

Export duties are calculated on the tax base described below and at the rate in force a the time the definitive export declaration is filed before the customs office.

Export duty tax base is defined by the Customs Code as a theoretical free on board value of a sale between independent parties, and includes the addition of expenses such as commissions and brokerage, among others. If a price has been agreed between related parties, the importer shall provide evidence that the price was not influenced by the relationship, usually by means of a transfer pricing report. In any case, the Argentine customs authority could determine the tax base for customs valuation purposes.

The Supreme Court analysed the application of export duties in light of the tax stability regime in the Minera del Altiplano SA case.

Export duties for certain commodities[17] were introduced by Decree No. 310/2002 and the Ministry of Economy’s Resolution No. 11/2202. However, according to Federal Customs’ General Instruction No. 19/2002, all exporters benefiting from tax stability under Law No. 24,196 (section 8) were exempt from paying these export duties.

This situation remained valid until 2007 when the Secretariat of Mining and the Secretariat of Domestic Commerce determined that export duties were also applicable to exporters benefiting from tax stability under Law No. 24,196, and therefore applicable to the claimant in this case.

In this context, Minera del Altiplano SA initiated a judicial pleading (amparo) to request the judge to declare that the it was not subject to the relevant export duties on the basis of the tax stability regime regulated by Law No. 24,196. Although the First Circuit judge[18] and Salta’s Federal Court of Appeals[19] upheld the taxpayer’s arguments – concluding that the increase in export duties was not applicable to Minera del Altiplano SA – the Supreme Court, based on the opinion of the Office of the Attorney General,[20] rejected the taxpayer’s request.

The Office of the Attorney General highlighted that the spirit of the stability regime was not to grant the taxpayer an exemption from new taxes or increases in existing taxes. Indeed, according to the Office of the Attorney General, the aim of the tax stability regime regulated by Law No. 24,196 is to grant tax stability and a cap for the total tax burden applicable at the time of the filing of the feasibility study. Moreover, the Minera del Altiplano SA case has emphasised that, according to article 8(5.1) of Law No. 24,196, the onus is on the beneficiary to prove the increase in its total tax burden and request reimbursement of the tax paid that generated that increase.

In conclusion, the importance of this leading case is that it highlights and confirms two major procedures arising from the tax stability regime: (1) the onus is on the beneficiary to prove any addition to its total tax burden; and (2) the proper procedure is to pay the taxes and then request reimbursement of the tax that infringed the stability regime. Hence, the Supreme Court did not deny the right of the mining company to request compliance with the stability regime but stressed that the taxpayer should comply with the regulated procedure and prove the infringement of the granted stability regime.[21]

In this context, by means of Joint Resolution No. 4428/2019 published in the Official Gazette on 27 February 2019 – and in force as of 15 March 2019 – the tax authorities and the Secretary of Mining set forth the procedure, requirements and terms that must be followed by mining companies enjoying tax stability, so as to request reimbursement of the tax paid in violation of that guarantee. To this end, the beneficiaries must submit the following documentation to the Secretary of Mining:

  • a sworn statement that must include – by project, tax and fiscal year (1) the amounts to be reimbursed, (2) the amounts paid or included in easy plans or moratorium regimes of the tax authorities, (3) an estimate of the amount that should have been paid according to the general tax regime for the fiscal year in question, and (4) the amount calculated as a result of the tax stability;
  • a sworn statement in which it must be justified in each case that there has been an increase in the tax burden, and pointing out the causes that triggered the increase;
  • documentation to provide evidence of the increase in tax burden at federal level; and
  • an accounting certificate, issued by an independent public accountant, indicating the reasonableness and legitimacy of the amounts to be reimbursed.

In addition, the following requirements must be met:

  • the taxpayer requesting the reimbursement must not have any unpaid debt;
  • the tax returns (including those corresponding to the informative regime) for fiscal years that are not time barred should have been filed with the tax authorities; and
  • reporting the account banking code in the Registry of Banking Passwords, set forth by General Resolution No. 2675 (tax authorities), as amended.

Tax stability in the region


Throughout Chile’s history, mining has consistently been a leading industry, namely, copper mining.[22] The growth of the mining industry has been supported by a successful government policy to attract foreign investment.

For almost four decades, foreign investment was promoted and protected under the regime created by Decree Law No. 600 of 1974 (DL 600), enacted by the Pinochet government.

DL 600 established a tax stability regime that provided access to the official foreign exchange market, and granted certain benefits to foreign investors, including:

  • the option of invariable income taxation at a rate of 42 per cent for 20 years;
  • invariable VAT and customs duties on imports of capital goods;
  • the option of no variation in the mining tax for 15 years; and
  • an alternative mechanism of calculating tax costs in a foreign currency.

Under DL 600, a foreign investor needed to enter into an agreement with the Chilean government (through the Foreign Investment Committee) every time it made an investment in the country.[23] Indeed, foreign investors that met the requirements set forth by DL 600 were requested to file an investment petition, which, once approved, was reflected in a foreign investor agreement.

As has been mentioned, the agreement granted certain guarantees to foreign investors, who were only required to make the investment in the mining project once the agreement was signed with the Foreign Investment Committee and within a term of eight years from execution of the agreement.

Although this procedure created certain layers of bureaucracy and additional costs for investors, the framework of DL 600 allowed foreign investors to make investments in the country under a stable tax regime, which not only encompassed income tax and VAT but also mining tax and customs duties on imports of capital goods for the development of mining projects.

Nonetheless, DL 600 was abrogated as a result of the comprehensive tax reform enacted by Law No. 20,780 in 2014.[24] In a similar context, on 16 June 2015, the Chilean Federal Congress enacted Law No. 20,848 (the New Regime), which sets forth a new legal framework for foreign direct investments in Chile from 1 January 2016.[25]

The New Regime includes a definition of direct foreign investment, which involves any transfer of foreign capital or assets into Chile, owned by a foreign investor or controlled by it, in an amount equal to or higher than US$5 million, through the transfer of freely convertible foreign currency; the contribution of physical assets; the reinvestment of earnings; the capitalisation of credits; or the transfer of technology that may be capitalised or credits associated with foreign investments from related parties.

In addition, the New Regime sets forth certain rights for the foreign investor: (1) to send abroad the transferred capital and the net profits generated by the investment, upon fulfilment of the relevant tax obligations; (2) access to the banking exchange market to settle or obtain foreign currency; and (3) not to be discriminated against when compared to domestic investors (ie, guaranteeing foreign investors the same treatment as local investors before the law, such as in tax disputes or expropriation compensation, among other benefits).[26]

One of the main advantages of the New Regime is that, under current regulations, foreign investors are entitled to the aforementioned rights without requiring authorisation from any foreign investment regulatory entities.

However, on the downside, the New Regime eliminates certain rights granted under DL 600, such as the opportunity to agree a fixed tax amount over a given term with the Chilean government (eg, including invariable income, invariable mining tax and the possibility of calculating tax costs in a foreign currency). In this regard, the New Regime specifically sets forth that foreign investors that signed foreign investment agreements with the Chilean government under DL 600 may request a foreign investment authorisation for a term of four years (the transitional period) to preserve all rights and obligations thereunder, provided that the agreements were signed before 1 January 2016.

Under the referred authorisation, foreign investors will enjoy the following rights and have the following obligations during the transitional period:

  • the right to execute the investment through any of the procedures established by DL 600;
  • an invariable income tax rate for 10 years, limited to an aggregate rate of 44.45 per cent;[27] and
  • invariable taxation for 15 years for investments allocated to mining projects with a value of US$50,000 or more.

These investors will have the right to invariability – under the rule of law effective from the date of signing the foreign investment agreement in regard to the specific mining tax – in any new mining taxes, or changes in the amount or form of calculation of mining exploration and exploitation permits.

In other words, foreign investors are entitled to choose to enter into foreign investment contracts as set forth in DL 600 – though with limited benefits as to form in which the investment can be made and tax invariability – until the end of the transitional period, which was due to end on 1 January 2020.


Peru is the third-largest producer of copper and silver, the sixth-largest producer of gold, and also produces considerable amounts of lead, tin, zinc and molybdenum.

Under Peruvian legislation, investors in mining projects are entitled to enjoy certain rights and guarantees upon making investments in the country. Regarding the tax stability benefit, current regulations allows investors to protect themselves from changes in Peruvian law by resorting to two kinds of stability agreements: (1) general stability agreements under the general Peruvian legal regime created by Legislative Decree No. 662 (DL 662);[28] and (2) mining stability agreements, which grant tax, exchange control and administrative stability for a specific mining project to the investor. Mining stability agreements are governed by the Peruvian General Mining Law.[29]

A general stability agreement is a civil contract that has the force of law and guarantees continued application of certain laws and regulations in force as at the implementation date. To execute a general stability agreement with the Peruvian government, investors are required to guarantee an investment of no less than US$5 million in any sector, except mining and hydrocarbons.[30]

Under the general regime, foreign investors are granted the following guarantees:

  • stability of the income tax regime (ie, the guarantee of a fixed income tax rate at corporate level);
  • free disposal of foreign currency;
  • free remittance of profits, dividends, capital and other income;
  • a favourable exchange rate in the market; and
  • no difference in the treatment of foreign and domestic investors.

To qualify for the benefit, foreign investors must invest at least US$10 million in a business established in Peru or in high-risk investments in Peru, with the effect of directly generating more than 20 permanent jobs and at least US$2 million in export income within three years of signing the general stability agreement.

In addition to general stability agreements, local and foreign investors in mining projects are entitled to execute guarantee agreements and investment promotional measures (mining stability agreements) with the Ministry of Energy and Mining (MINEM), on behalf of the Peruvian government.

Similar to general stability agreements, mining stability agreements have the force of law and protect investors from changes in certain regimes, laws and regulations for a term of 10, 12 or 15 years – from the date of the implementation or expansion of the investment – depending on the investment and level of production, as applicable.

Companies involved in mining activities that start, or are carrying out, operations of between 350 tonnes and a maximum of 5,000 tonnes per day, may enter into a 10-year stability agreement. Further, companies that undertake an investment commitment of at least US$20 million may also enter into a stability agreement (the stability regime would be in force as of the date on which the full investment is met). Companies can choose to benefit from the stabilised regime in advance for a maximum period of three years, within which the minimum investment must be reached. This advance term shall be deducted from the 10-year term of the agreement.[31]

Companies with a starting capacity of more than 5,000 tonnes per day, or with expansion projects under way to achieve a capacity of more than 5,000 tonnes per day, may enter into a 12-year stability agreement. Further, companies that undertake an investment commitment of at least US$100 million (for the commencement of mining activities) or US$250 million (for mining companies already carrying out expansion projects) may also enter into a stability agreement (the stability regime enters into force on the date on which the full investment is met). Companies can choose to benefit from the stabilised regime in advance for a maximum period of eight years, within which time the minimum investment must be reached. This advance term shall be deducted from the 12-year term of the agreement.[32]

Companies with a starting capacity of more than 15,000 tonnes per day, or with expansion projects under way to achieve a capacity of more than 20,000 tonnes per day, may enter into a 15-year stability agreement. Further, companies that take on an investment commitment of at least US$500 million may also enter into a stability agreement (the stability regime enters into force on the date on which the full investment is met). Companies can choose to benefit from the stabilised regime in advance for a maximum period of eight years, within which time the minimum investment must be reached. This advance term shall be deducted from the 15-year term of the agreement.[33]

From a tax perspective, under general stability agreements, investors are only entitled to obtain stability on the applicable income tax regime. However, mining stability agreements allow investors to protect themselves from any changes in the income tax system, compensation, the tax refund regime, duties, consumption taxes – except for the rate of tax rate – and the special regime for tax returns.[34]

Unlike the Argentine tax stability regime, stability protection under a mining stability agreement in Peru is granted once the investor files an investment plan with MINEM. The stability guarantee will start from the date of accreditation of execution of the investment.

Investors in mining activities are entitled to execute both kinds of agreement (ie, the general stability agreement with the Private Investment Promotion Agency of Peru, and the mining stability agreement with the MINEM, at the same time in order to benefit from both regimes).[35]

Finally, companies that are protected by a tax stability agreement in Peru are subject to a special mining tax. This tax is levied at between 2 per cent and 8.4 per cent on operational profit from sales of metal minerals, and can be deducted from corporate income tax.[36]

Final comments

A lesson that developing countries should learn from developed countries is that the successful development of mining activity depends mainly on the legal certainty available to the investor.

Taking into account the economic and legal volatility in some countries in South America, the guarantee of tax stability is an essential tool in protecting mining investments from incidences of regulatory changes that may occur over the duration of the mining project.

As has been shown in this chapter, this guarantee of tax stability is stipulated by law in Argentina, whereas in Chile and Peru the investor must enter into an agreement with the state to qualify for the benefit.

Apart from the debate about whether statutory or contractual tax stability offers a higher degree of protection, the fact is that, in practice, these three countries have not always respected the application of the guarantee of tax stability – in Argentina, through the creation of export rights on certain commodities by the previous administration, and in Chile and Peru through the government’s renegotiation of the tax stability agreement.

In Argentina, the main obstacle to being fully protected by the tax stability provision is that, in practice, whenever there is an increase in the applicable tax rates or a new tax is introduced, it is the investor who must prove the actual increase in the tax burden as at the date of presentation of the feasibility study. This situation has caused a myriad of judicial conflicts with an unfavourable outcome for the investor.

Therefore, any amendment to current regulations of mining investments in Argentina should consider certain adjustments so that the tax stability regime is not just an empty promise. One possible solution would be to modify the scope of the current law provision, which allows the state to increase the applicable rates and create new taxes as long as other taxes are eliminated to compensate for the increase. The revised mechanism would directly allow the investor to apply the tax regime that was in force on the date of filing the feasibility study during the development of the mining project, without having the burden of demonstrating the increase in the tax burden every time there is a modification to the applicable tax rates.