By Atty. Patricia A O Bunye and Atty. Rafael Raymundo A Evangelista | Lexology | May 15, 2025

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?

The total government share in a mineral production sharing agreement is the excise tax on the mineral product or 4 per cent based on the actual market value of the gross output thereof at the time of removal.

The government’s share in a co-production and joint-venture agreement shall be negotiated with the contractor considering the capital investment, risks involved, contribution to the economy and other factors for fair and equitable sharing. The government shall also be entitled to compensation for its other contributions, as agreed upon by the parties, consisting of the contractor’s income tax, excise tax and other taxes, duties and fees provided in existing laws.

The government share in a financial and technical assistance agreement (FTAA) is negotiated by the government and the contractor and consists of, among other things, the contractor’s income tax, customs duties and fees on imported capital equipment, the excise tax on minerals, royalties for mineral reservations and to indigenous peoples, local business tax, other national and local government unit taxes, royalties and fees.

Taxes
After the lapse of the income tax holiday granted to the contractor by the Omnibus Investments Code, the contractor shall pay income tax. The contractor is also liable for excise tax on mineral products, value-added tax under the National Internal Revenue Code, customs duties under the Tariff and Customs Code, local business taxes and real property tax under the Local Government Code.

The contractor must likewise pay an annual occupation fee, based on the area occupied, and mine waste and tailings fees.

Royalties
Contractors shall pay royalties to the concerned indigenous cultural communities based on the agreed payment, which may not be less than 1 per cent of the gross output.

For MAs and FTAAs over areas covered by small-scale miners, contractors shall pay royalties to the concerned small-scale miners upon utilisation of the minerals, depending upon their agreement.

Mining operations within mineral reservations are subject to a royalty paid to the Philippine Mines and Geosciences Bureau (MGB) of not less than 5 per cent of the market value of the gross output of the minerals or mineral products extracted or produced, exclusive of all other taxes.

Tax advantages and incentives
What tax advantages, tax credits and incentives are available to private parties carrying on exploration and mining activities?

Contractors are entitled to fiscal and non-fiscal incentives under the Omnibus Investments Code. The Philippine Mining Act provides that mining activities should always be included in the Investment Priorities Plan prepared annually by the Board of Investments. The guidelines issued by the Board state that the exploration of mineral resources or processing of minerals to produce semi-processed mineral products may qualify for registration with incentives limited to capital equipment.

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

Presently, there are no tax stabilisation agreements on mining in force in the Philippines.

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

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?

Gains realised on a transfer of licence are generally subject to income 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?

The law makes no distinction between the duties, royalties, and taxes payable by domestic and foreign parties, whether to the government or indigenous cultural communities.

Source: Lexology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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