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?

A company earning revenues from mining is liable to pay corporate income tax under the Revenue Code. The current rate is 20 per cent of the net profit. Dividend payments to overseas shareholders are generally subject to a withholding tax of 10 per cent.

Mineral royalties

The Thai government collects mineral royalties from mining and mineral production. The Minerals Act provides that the persons under the Minerals Act, including the mining lease holder and metallurgical operator, must pay a mineral royalty, fees and a special contribution in Chapter 11. The mineral royalty rate for each type of mineral is determined by a ministerial regulation issued under the Mineral Act, and shall not exceed 30 per cent of market price. See the MOI’s MR and two notifications issued on 1 October 2018 prescribing mineral royalty rates, guidelines regarding collection, market price determination, assessments, etc.

The MR BE 2561 (2018) prescribes mineral royalty rates, based on a market price announced by the Director General of DPIM, at the following rates:

  • tin ore - 2.5 per cent to 20 per cent;
  • mineral ore with tungsten oxide - 2.5 per cent to 20 per cent;
  • lead ore - 2.0 per cent to 15 per cent;
  • gold ore - 2.5 per cent 20 per cent;
  • zinc ore - 2.0 per cent to 15 per cent;
  • gemstone - 10 per cent; and
  • other mineral ores, as per the annex to the MR, at rates between 4 per cent and 10 per cent.

ML holders shall pay a special contribution of no more than 10 per cent of the mineral royalty of the minerals produced under that licence.

The Minister, on the recommendation of the Mineral Committee, may reduce fees and issue qualifications for eligibility for such reductions under defined circumstances, including ‘reasonable grounds’ (section 137).

Royalties will be paid based on the value of the particular mineral. Under the old Mineral Royalty Rates Act, some minerals were subject to the progressive rate with varying levels according to the price range and the maximum mineral royalty rate, while other types of minerals were subject to flat rates according to the kind, type and importance of the mineral.

Value-added tax (VAT)

Mining companies are subject to VAT at a flat rate of 10 per cent (temporarily reduced to 7 per cent). However, a zero VAT rate applies to exports of minerals by mineral traders. VAT payable is calculated from the difference between input tax (VAT paid by the mining trader to suppliers of goods or services) and output tax (VAT collected by the mining trader from persons who purchase goods or services).

Double tax treaties with other nations

At present, Thailand has double tax treaties with 61 countries, including China, Japan and the United States.

Tax advantages and incentives

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

BOI promotional incentives

Currently (since 1 January 2015), under the Investment Promotion Act, only potash mining and dressing projects are eligible for promotion. As a precondition to applying for BOI incentives, a GPL, SPL or EPL must be obtained prior to submission of an investment promotion application for prospecting projects, and an ML must be obtained for potash mining and dressing projects prior to submission of an investment promotion application. Other types of mining activities are not eligible for promotion. The BOI’s website at www.boi.go.th includes a guide to the BOI and a summary of business law.

A mining project promoted by the BOI may be granted benefits including exemptions of customs duties for one year (which may be extended as deemed appropriate by the Board) on imported equipment and raw or essential materials used in manufacturing export products, and other non-tax incentives.

Tax stablisation

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

There is currently no legislation in force that provides for either tax stabilisation or tax stabilisation agreements.

Carried interest

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

Although there is no prohibition on the government holding an interest in mining projects, there is no precedent for such engagement by the government.

Transfer taxes and capital gains

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

Consideration for transfer of licence is categorised as a taxable income that is subject to income tax at the rate prescribed by the Revenue Code. Capital gains are treated as normal income. VAT is applicable to transfers of rights.

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?