Existing mines to generate addt'l P6.2B in annual revenue under new law —DOF

The Department of Finance (DOF) on Thursday welcomed the signing of the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act, saying this will generate additional revenue for the country’s minerals sector.

President Ferdinand “Bongbong” Marcos Jr. earlier signed Republic Act 12253, or the new mining fiscal regime law, which aims to simplify and rationalize the fiscal regime for large-scale metallic mining by removing tax distinctions based on mining agreements. 

The new law is expected to generate an estimated average annual incremental revenue of P6.26 billion for existing mines, the DOF said in a statement.

All large-scale metallic mining operations are now subject to a unified tax regime aimed at encouraging investment in the sector and promoting tax compliance.

In particular, the new fiscal regime includes a five-tier royalty rate, ranging from 1% to 5% for mines outside mineral reservations; a minimum royalty rate of 0.1% on gross output for mines below the margin threshold; and a five-tier windfall profits tax ranging from 1% to 10%. 

Further, the law establishes safeguards by implementing a 2:1 debt-to-equity ratio, or a thin capitalization rule, to limit the amount of tax-deductible borrowing cost arising from debt. 

The DOF said the law also adopts a “ring-fencing” rule on a project-by-project basis to prevent the consolidation of income and expenses for all mining projects by the same taxpayer. 

This prevents companies from offsetting losses from more profitable projects, the Finance Department said.

Local government units will also receive 40% of the gross collections from excise taxes on mineral products, royalties, and other taxes or fees.

The DOF said the law also ensures the enforcement of strict monitoring and auditing standards on mineral sales and exports.

The measure likewise promotes transparency in the mining sector by mandating the public disclosure of data and establishing a multi-stakeholder mechanism to enable participatory governance in accordance with international standards for open and accountable extractive resource management.

The Finance Department added that the law earmarks funds to support research, monitoring, and enforcement, with 10% of the royalty collected from mines within mineral reservations going to mineral exploration and research.

The funds will also be used to establish laboratories and equip the Bureau of Internal Revenue (BIR) with specialized tools that will enable proper oversight and validation of mineral resource valuation for taxation purposes.

“The Department of Finance is committed to implementing this law swiftly, efficiently, and with full transparency. We will also continue to engage with all stakeholders to ensure that the law delivers on its promise,” said Finance Secretary Ralph Recto.

The Chamber of Mines of the Philippines (COMP), in a separate statement, said the legislation is a "crucial step toward establishing a stable, transparent, and competitive fiscal environment for the Philippine mining industry."

“We recognize that increased taxation is inevitable. We also see the importance of what this law provides: predictability and consistency in the fiscal framework, which are essential for long-term planning and investment. The new tax regime aligns the Philippines with global mining jurisdictions, making us more competitive and attractive to investors, especially at a time when the demand for critical minerals is increasing worldwide,” the miners chamber said.

COMP added that the law establishes a framework that provides government and host communities with a fair share of revenues during periods of high commodity prices, while allowing for reasonable tax relief for mining companies when prices are low.

“This policy milestone comes at a pivotal moment as the Philippines seeks to position itself as a reliable source of essential minerals for the global energy transition,” it said. — VBL, GMA Integrated News