Philippines Introduces Enhanced Fiscal Regime for Large-Scale Metallic Mining

Strategic Insights -

President Marcos has signed into law the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act, which aims to simplify the country's mining fiscal regime, ensure a fairer government share from natural resources, and protect the environment. The law establishes a simplified and uniform fiscal framework for the mining sector, enhances environmental safeguards, and provides fiscal predictability and stability for investors. The measure also aims to provide incentives to long-term investments and improve the mining sector's competitiveness.

Key Takeaways:

  • The Enhanced Fiscal Regime for Large-Scale Metallic Mining Act establishes a simplified and uniform fiscal framework for the mining sector, enhancing environmental safeguards and providing fiscal predictability and stability for investors.
  • The law introduces a five-tier, margin-based royalty at rates ranging from one to five percent on income from metallic mining operations outside mineral reservations, and a minimum royalty rate of 0.1 percent on gross output for mines below the margin threshold.
  • The law also imposes a five-tier, margin-based windfall profits tax at rates ranging from one to 10 percent on income from metallic mining operations and implements a 2:1 debt-to-equity ratio or a thin capitalization rule applicable to related-party debt.
  • The Philippines expects an estimated revenue of P25.08 billion from 2026 to 2029 or an annual average of P6.26 billion from the new mining fiscal regime.
  • The law establishes a multi-stakeholder accountability group to uphold transparency and accountability, and institutes mechanisms for the monitoring and auditing of mineral sales and exports.
  • Local governments will receive 40 percent of the gross collections from excise taxes on mineral products, royalties, and other taxes or fees.
  • The law allocates 10 percent of mining royalty from inside mineral reservations to the exploration efforts of the MGB, establishment of mineral valuation laboratories, and acquisition of BIR tools.
  • The mining sector is expected to create jobs, increase government revenues for essential services, and attract responsible investors.

Statistics:

  • Estimated revenue from the mining fiscal regime: P25.08 billion from 2026 to 2029 or an annual average of P6.26 billion.
  • Gross value added in mining in 2023: P170.3 billion, accounting for about 0.70 percent of the country's gross domestic product.
  • Mineral exports in 2023: approximately 9.62 percent of total exports.
  • Taxable income generated by the mining sector in 2023: P48.8 billion.

Sources:

  • "Manila -- President Marcos yesterday signed into law a measure that seeks to simplify the country's mining fiscal regime..." - Philippine news outlet.
  • Statement by President Marcos during the signing ceremony for the law at Malacanang.
  • Statement by Chamber of Mines of the Philippines (COMP) president Michael Toledo.
  • Statement by Special Assistant to the President for Investment and Economic Affairs Frederick Go.
  • MGB's quarterly statistics for 2023.
  • Philippine Ecosystem and Natural Capital Accounting System.