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?
Argentina is organised as a federal country, in which the taxing power is distributed between the national government and the provinces. In addition, municipalities also hold taxing power faculties with limited scope.
As a general rule, entities carrying on mining activities in Argentina are subject to the general taxation framework applicable to all companies, which comprises income tax, VAT, alternative minimum income tax, gross turnover tax, etc.
With regard to specific duties payable by the mining sector, the provinces, as owners of the mineral resources, are entitled to collect a royalty payment to be calculated as a percentage of the pithead value of the mineral extracted. MIL capped the royalties to be collected by the provinces at 3 per cent. Provinces that have adhered to MIL - which most have - are legally committed not to exceed this cap. In addition, the provinces have their particular royalties’ regulation and can set specific rules within the referred to percentage.
In September 2018, the national government resolved by means of Decree No. 793/2018 to impose temporary export duties on the export of goods. The applicable fixed rate is 12 per cent for the export of all type of merchandise included in the tariff positions of Annex I of the NCM. In the case of mineral exports (which include copper, lithium and zinc, among others), the export duty may not exceed three Argentine pesos for each US dollar of the taxable value or the official FOB price, as applicable. The exception is made with gold, which is capped at four Argentine pesos for each US dollar of the taxable value or the official FOB Price. However, we note that this measure was issued as temporary and will be valid until 31 December 2020.Tax advantages and incentives
What tax advantages and incentives are available to private parties carrying on mining activities?
MIL establishes a promotional regime that provides for certain tax incentives and benefits for companies duly registered thereunder, which has proven to be especially useful for large-scale mining projects.
The main features and benefits of the MIL are as follows:
Stability shall be in force over a 30-year period, as from the date of filing of the feasibility report.
Cap on royalties
Provinces that adhere to these regulations may not charge royalties over 3 per cent on the pithead value of the mineral obtained.
Beneficiaries that purchase or import new capital assets or services that are directly or indirectly applied to mining activities may obtain a relief in the financial impact of VAT by means of two special mechanisms:
Exemption on duties and other charges in relation to the import of capital assets and other goods as determined by the enforcement authorities associated to the local project.
Other tax benefits
Assets associated to mining projects under the MIL are exempt from alternative minimum presumed income tax.
In addition to the federal advantages, some Argentine provinces foresee the following:
- exemption or reduced gross turnover tax rates on the local commercialisation of minerals;
- export of minerals is not subject to gross turnover tax in any province; and
- stamp tax exemptions.
The scope and extension of each benefit depends on each jurisdiction.Tax stablisation
Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?
MIL provides a 30-year tax stability applicable to the project’s tax burden in force as at the filing of a feasibility report. MIL works as a general framework applicable to all mining companies that comply with its requirements. There are no tax stabilisation agreements.
Consequently, the total tax burden applicable to the project at the national, provincial and municipal levels will not be increased as a result of any new tax, duty or charge. The benefit works as a cap, thus, if taxes are abrogated or tax rates decreased, stabilised projects will benefit from those changes.
General information exchange regimes and customs duties regulations are likewise included in the law (except for exchange rate, reimbursements and refunding of taxes as a result of exports that are governed by different specific laws). Indirect taxes (eg, VAT and excise taxes) and social security contributions are excluded from the tax stability benefit.Carried interest
Is the government entitled to a carried interest, or a free carried interest in mining projects?
The government does not have carry rights in mining projects. Nevertheless, it became common practice in certain provinces that mining rights were awarded to state-owned companies, which in turn entered into farm-out or option agreements with private third parties and retained free carry rights or options over these properties or over the vehicles through which these were held.Transfer taxes and capital gains
Are there any transfer taxes or capital gains imposed regarding the transfer of licences?
The transfer of mining rights is subject to capital gains tax, which varies depending on the status of the seller. This tax also applies if the transfer is accomplished by direct or, in some cases, the indirect transfer of shares of the Argentine vehicle.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 are no substantial distinctions between resident and non-resident investors from an Argentine tax perspective. The main difference is that in most cases, taxes for domestic parties are calculated on a net basis, whereas calculated on a gross basis for foreign parties payable through a withholding mechanism by the Argentine payor.
Also, business entities or vehicles resident in non-cooperative jurisdictions (as a general rule, this includes those jurisdictions with which Argentina does not have an in-force convention for information exchange or an international tax treaty that includes an information exchange clause) have less favourable treatment in Argentina.