This Monday, January 1, the new law that establishes compensation in favor of the State for the exploitation of copper and lithium mining, known as «mining royalty», officially came into force. which was dispatched by the National Congress last May and promulgated by President Gabriel Boric in August after almost five years of processing.
With the legislation in place, the Government plans to collect some 1,350 million dollars a year, equivalent to 0.45 points of the Gross Domestic Product. And a third of them -450 million dollars or around 392 billion pesos- will be distributed for the development of the country’s regions and communes.
The Minister of Finance, Mario Marcelpointed out this day that «during this year we hope to raise an important part of what is planned as the collection goal, around 0.25% of the product, it is still more or less half of what is expected in the regime.»
He valued, meanwhile, that «this is a very important law for our country because «What it will allow is to increase the participation of the State and, through the State, citizens in general in the income from large-scale copper mining.»and that «we approved this legislation with the fruits of a process of dialogue with the industry and with all political sectors that finally led to transversal approval.»
He also explained that the royalty means, «on the one hand, increasing the contribution of large-scale copper mining to the country’s income, and on the other hand, also establishing conditions of less uncertainty through the establishment of the global limit of the tax burden of the great copper mining».
This year begins with the entry into force of the new Law of #RoyaltyParaChilewhich proposes a new tax scheme for large-scale mining, a mechanism that seeks to raise more resources to enhance the regions and communes of the country 🇨🇱 pic.twitter.com/lcPwmXnlqw
— Government of Chile (@GobiernodeChile) January 1, 2024
THE NEW TAXES ON MINING
The project had been introduced in September 2018 by a group of deputies from the current ruling party, but it was stalled for years in Congress. Finally, the Government of Gabriel Boric promoted its processing with dozens of emergencies and, thanks to several modifications and an agreement with the Executive that aimed to provide greater certainty and achieve a balance between achieving greater revenue and benefits for the regions without discouraging mining investment , the law was approved transversally on May 17, 2023.
The law repeals the Specific Tax on Mining Activityso that from now on the taxation of the industry will be regulated by its own legal body.
This new framework contemplates a maximum potential tax burden of 46.5% to large mining with annual sales of more than 80 thousand metric tons and of 45.5% for those operations with annual sales between 50 thousand and 80 thousand metric tons of fine copper (TMCF). In both cases, said limit will be calculated on the adjusted mining operational taxable income (RIOMA).
In addition, three funds are created for regional governments and mining communities for a total of 450 million dollars: Mining Communes Fund, which will benefit 32; he Territorial Equity Support Fund, which will favor the most vulnerable communes that are more dependent on the Municipal Common Fund (FCM); and the Regional Production and Development Fundwhich will support the Regional Governments.
There is also a 1% ad valorem tax on those producers of more than 50 thousand metric tons of fine copper per year.
The new taxes «will not only mean more revenue; they are not to enlarge the State’s coffers, but rather they are for the benefit of the people and families of Chile,» said President Boric last August, during the promulgation of the royalty. , that «It will translate into greater well-being and quality of life for the regions.»