Chile amends mining royalty bill with flat tax rate for large producers

October 27, 2022

A proposed mining bill in Chile was amended to remove provisions that assessed higher rates for large mining companies and linked payments to copper prices, while implementing a flat 1 percent ad valorem tax rate for large producers.

Global mining companies including BHP and Antofagasta criticized the original bill and argued that the it would affect competitiveness and investment in Chile, the world’s largest copper producing nation.

Reuters reported that the amended proposal, announced by the finance and mining ministers, would impose a flat-rate ad valorem tax of 1 percent on large-scale copper miners that extract more than 50 kt/a (55,000 stpy). The ad valorem tax would not be assessed if operating margins are negative.

Additional royalties would be assessed at rates fluctuating from 8 percent to 26 percent based on miners’ operating margin, rather than being adjusted according to the price of copper as was originally proposed in the bill that was proposed in July.

In the original proposal two components for royalty payments were established. The first was an ad valorem tax ranging from 1 percent to 2 percent for producers of between 50 kt and 200 kt and (55,000 and 220,000 st) of fine copper, and from 1 percent to 4 percent for those over that range.

The other component was royalty rates between 2 percent and 32 percent on profits for copper prices between $2 and $5.
Both components were to have varied based on the copper price.

In the revised bill, depreciation, as well as supply and work costs, would be taken into consideration in calculating operating margins.

“Considering these changes, it is estimated that the mining royalty would collect an additional 0.6 percent of GDP, of which 0.46 percent of GDP would be the product of the new structure and the remaining 0.15 percent the result of growth in production and costs,” the Finance Ministry said in a statement.



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