Republicoftfiephilippines
HOUSE 0F REPRESHNTATIVES
Quezon City, Metro Manila
NINETEENTH CONGRESS
First Regular Session
HouseBi|]No.8050
Introduced by Representative Midy N. Cua
Lone District, Quirino
AN ACT
ESTABLISHING THE FISCAL REGIME FOR THE MINING INDUSTRY
EXPLANATORY NOTE
The  Philippine mining industry contributed  P102.3  billion to the Gross Domestic Product (GDP)  in
2020.  In 2020, the total value of minerals, mineral products, and non-metallic mineral manufacture
exported was at US$5.2 billion]. Additionally, around one-third of the country's total land area of 30
million  hectares contains high  deposits of gold, nickel,  copper,  and  chromite,  among others2.  As of
February 2022, there are 55 operating metallic mining sites in the country.
The mining industry has great potential to generate more revenue for the government through `taxes,
provide employment opportunities, and build up the country's gross international reserves throufgiv the
industry's mandated sale of gold to the Bc7#gfo Se#trcz/ ng Pi./jz7i.#crs under Republic Act No. 70'76, or
the People's Small-Scale Mining Act of 1991.
Ph::pj:tii:ih.::.e#eir2£ub¥:t.::T.sushT:::gep#eeo|P,tthincTn;tei:is#:f.::dmL:eursa::ei:f#::s:4#
which was passed on Third Reading. This proposed measure is the result of further refinements €md to
improvements  introduced  said  bill  in  the  l8th  Congress  by  the  House  Committee  on  Ways  and
Means, under the leadership of this Representation, as House Bill No. 6135.
This measure proposes the imposition of royalty payments of (I ) three percent (3%) on gross c)utput
of large-scale metallic mining operations within mineral reservations, (2) graduated rates on the profit
margin  of large-scale  metallic  mining  operations  outside  mineral  reservations.  and  (3)  1/10  of one
percent  (1%)  of gross  output  of small-scale  metallic  mining  operations.  A  margin-based  windfall
profits tax gained on all mining operations shall also be imposed. For tax purposes. small-scale miners
must  register  with  the  Mining  Board  of the  concerned  local  government  unit  and  the  Mines  and
Geosciences Bureau.
Additionally,  ring-fencing  is  proposed  to  prevent the  consolidation  of income  and  expenses  of all
mining projects by the same taxpayer, thereby ensuring that losses from other mining projects could
not  be  deducted  from  the  more  profitable  ones.  Thin  capitalization  shall  also  be  introduced  so
I DENR data
2 PSA data


businesses  will  not  depend  on  excessive  debt  funding,  which  may  lead  to  high  interest  expense
deductions and the resultant reduction of corporate tax liability.
The  bill  also  exempts  mining  contractors  from  the  confidentiality  clauses  of the National  lnternal
Revenue   Code   of   1997,   as   amended.   and   institutionalizes   the   Philippine   Extractive   Industry
Transparency Initiative (PH-EITI). With the expected increase in mining activities due to the liftfing of
the  nine-year  moratorium  on the  grant  of new  mineral  agreements,  an  institutionalized  EITI  shall
provide a framework for the good governance of our mineral resources and ensure transparenc.y and
accountability from the government and the extractive industry. Better resource governance equa,tes to
higher revenue generation from the sector.
Lastly, the  measure proposes to create  a Natural  Resource Trust Fund  from the  revenues collected
from the margin-based royalty to fund projects that will redound to the benefit of local governments
directly affected by mining activities. The trust fund shall serve as inter-generation savings to protect
the  environment  and  provide  the  needs  of host  local  government  units,  given  the  non-renewable
nature of mineral  resources.
In view of the necessity to promote economic recovery amidst continuing threats to growth, such as
the COVID-19 pandemic, and to boost the mining industry's potential contribution to the  country's
gross domestic product while safeguarding our mineral resources and the rights of host commuliities,
the passage of this bill is earnestly sought.
This measure was previously proposed in the  18th Congress by Representatives Estrellita 8. Suansing,
Horacio P. Suausing Jr., Rodrigo A. Abellanosa, Luis Raymund "LRay" F. Villafuerte, Jr., Sharon S.
Garin,   Vilma   Santos-Recto,   Rufus  8.   Rodriguez,  Joey   Sarte   Salceda,   Stella  Lur  A.   Quinbo,
Deogracias Victor "DV" 8. Savellano, Junie E. Cue, Jose "Ping-Ping" I. Tejada, Micaela S. Vi()lago,
Greg G. Gasataya, Romeo M. Ja]osjos, Jr., Jose Enrique "Joet" S. Garcia Ill, Juan Miguel Maca,pagal
Arroyo,  Peter John  D.  Calderon,  Manuel  Jose  "Mannix"  M.  Dalipe,  Ed Christopher S.  Go,  Manuel
"Way Kurat"  E.  Zamora, Narciso R.  Bravo,  Jr.,  Glona G. Labadlabad,  Joselito "Joel" S.  Sacdalan,
Francisco  "Kiko"  8.  Benitez,  Maximo  Y.  Dalog,  Jr.,  Ramon "Mom-Mom"  V.  Guico  Ill,  Tyrone D.
Agabas,  Kristine  Singson-Meehan,  Adbullah  D.  Dinaporo,  Yasser  Alonto  Balindong,  Gabriel  H.
Bordado,  Jr.,  Isagani  S.  Amatong,  Joel  Mayo  Z.  Almario,  Lorenz  R.  Defensor9  Alfred  C.  Delos
Santos, Ferdinand R. Gaite, and Rossana "Ria" Vergara as authors thereof.
In view of the foregoing, approval of this measure is earnestly sought.
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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila
NINHTEENTH CONGRE SS
First Regular Session
HouseBillNo.8050
Introduced by Representative Midy N. Cua
Lone District, Quirino
AN ACT
ESTABLISHING THE FISCAL REGIME FOR THE NINING INDUSTRY
Be it enacted by the Senate arid H.ouse Of Representatives Of the Philippines in Congress assembled:
1        SECTION 1.   Section 34(B) of the National Revenue code of 1997, as amended, is hereby amended
2        to read as follows:
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"SEE . 34 . Deductions from gross Income. - x x x
•`(A\) Expenses. -
"XXX
"(8) Interest. -
"(I) x x x
"(2) x x x
"(3) x x x
"(4)   LIMITATION   OF   INTEREST   EXPENSE   DEDUCATIONS   FOR   MINING
CONTRACTORS:
(A)IF  A  MINING   CONTRACT0  HAS  A  DEBT-TO-EQUITY   RATIO  IN
ExcEss  OF  3  TO  1  AT  ANy  TiME  DURING  A  TAXABLn  yHAR,  A
DEDUCTION  IS  DISALLOWED  AS  A  TAX-DHDUCTIBLE   EXPENSH
FOR THH INTEREST PAID BY THE MINING CONTRACTOR DURING
THAT YEAR ON THAT PART 0F THE DEBT THAT EXCHHDS THE 3
T0 1 RATIO FOR THE PERIOD THE RATIO WAS EXCEEDHD.
(B) IF  THH   DEBT-TO-EQUITY   RATIO  0F   A  MINING   CONTRACTOR
EXCEHDS  3  T0  I  FOR  AN  INCOME  YEAR,  SUBSECTION  (A)  DOES
NOT APPLY IF, AT ALL TIMES, DURING THE YEAR, THE AMOUNT
0F THE DEBT 0F THE MINING CONTRACTOR DOES NOT EXCEED
THH ARM'S LENGTH DEBT AMOUNT.
(C) FOR THE PURPOSES 0F THIS SECTION, THE THRM -
(1) ARur's I,ErvGrm DEBrAMot/rvr SHALL MEAN THE AMouNT oF
DEBT  THAT  A  BANK  THAT  IS  NOT  AN  ASSOCIATH  0F  THE
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MINING  CONTRACTOR  WOULD  BE  PREPARED  TO  LEND  T0
THE  MINING  CONTRACTOR  HAvlNG  RnGARD  To  ALL  THE
CIRCUMSTANCES 0F THE MINING CONTRACTOR
(2) AssocL4rE SHALL MEAN ANT OTHER PEREON WHo ACTs oR
MAY     ACT     IN     ACCORDANCE     WITH     THE     DIRECTIONS,
REQUESTS,    SuGGnsTloNs,    oR    wlsHEs    oF    THH    FIRST-
MHNTIONED PERSON, AND THH FIRST-MHNTI0NHD PERSON IS
AN ASSOCIATE OF THE SECOND-MENTIONED PERSON
(3) DEBT SHALL  MEAN  THE  GREATEST  AMouNT,  AT  ANT  TIMH
DURING  AN  INCOME  YHAR,  OF  THE  DEBT  OBLIGATIONS  OF
THH MINING CONTRACTOR 0N WHICH INTEREST IS PAYABLH
AS DETERMINHD ACCORDING T0 INTERNATIONAL FINANCIAL
REPORTING STANDARDS
(4) DEBT oBfiGid 7TOIV SHALL MEAN AN oBLIGATloN To MARE A
REPAYMENT  OF  MONEY  T0  ANOTHER  PERSON,  INCLUDING
AN OBLIGATION ARISING  UNDHR A PROMISSORY NOTE.  BILL
0F  EXCHANGE,  OR  BOND,  BUT  NOT  INCLUDING  ACCOUNTS
PAYABLE   0R  AN  OBLIGATION   T0   MAKE   REPAYMHNT  0F
MONEY IN RESPECT 0F WHICH N0 INTEREST IS PAYABLE
(5)  EQUITY SHALL MEAN THE GREATEST AMOUNT, AT ANY TIME
DURING  AN  INCOME  YEAR, OF  THE  EQUITY  OF  THE  MINING
C ONTRACTOR        A S        DETE RMINE D        AC CORD] NG        T0
INTERNATIONAL   FINANCIAL   RHPORTING   STANDARDS   AND
INCLUDES   AN   OBLIGATION   TO   MAKE   A   REPAYMENT   OF
MONEY IN RESPECT 0F WHICH NO INTEREST IS PAYABLH
"(C) Taxes. -
„xxx
"(D) £osb'es.  -
"xxx
•.(E) Bed Debts. -
„xxx
"(F) Depreciation. -
„xxx
C`(a) Depletion Of Oil and Gas Wells and Mines. ~
«xxx
C.(H) Charitable and Other Contributions. ~
"xxx
C¢(I):) Research and Development. -
"xxx
cc(I) pens ion Trusts. -X X X
•`CK:) Additional Requirements for Dedrctibility Of certain Payments. -x x x
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"(I) Optiorral Standard Deduction. -xxx
SEC. 2.  The  chapter title  of Chapter VII.  Title  VI  of the National  lnternal  Revenue Code of 1997
(NIRC), as amended, is hereby amended to read as follows:
"CHAPTER   VI   -   [EXCISE   TAX   ON   MINERAL   PRODUCTS]   TAXATION   0F
MINERAL PRODUCTS".
SEC. 3. The section title of Section  151. Chapter VII Title VI of the National Internal Revenue Code
of 1997, as amended, is hereby amended to read as follows:
C.EEC.151. TAX ON Mineral Products. -"
SEC. 4. A new section shall be inserted as Section  151-A of the National lnternal Revenue Code of
1997, as amended, to read as follows:
"SEC. i5i-A. RorHf ry. -FOR LARGE-SCALE MHTALLlc MINING oPHRATloNs
WITHIN  MINHRAL  RESERVATIONS.  -  MINING  CONTRACTORS  0F  LARGE-
SCALE METALLIC MINING OPERATIONS WITHIN MINERAL RESERVATIONS
SHALL  PAY  TO  THE  GOVERNMENT  A  ROYALTY  EQUIVALENT  T0  THRHE
PERCENT  (3%)  OF  THE  GROSS  OUTPUT  OF  THE  MINHRALS  OR  MINERAL
pRODucTs  HXTRACTHD  OR  pRODucED  By  THE   MINING  opnRATIONs,
EXCLUSIVE 0F ALL OTHER TAXES;
(A) FOR   LARGE-SCALE   METALLIC   MINING   0PHRATI0NS   OUTSIDE   0F
MINERAL RESERVATIONS. -   MINING CONTRACTORS 0F LAR.GE~SCALE
MHTALLIC MINING OPERATIONS OUTSIDE OF MINERAL RESERVATIONS
SHALL  PAY  T0  THE  GOVERNMENT  A  MARGIN-BASED  ROYALTY  0N
INCOME   FROM   MINING   OPERATIONS   IN   ACCORDANCE   WITH   THE
FOLLOWING TABLE:
MARG IN                                            ROYALTY
1% UP T010%                                  1.0oo/o
ABOVE loo/a
AB0VH20®/a
ABOVE3oo/a
AB0VE4oo/a
AB0VE50°/a
AB0VE6oo/o
ABOVE7oo/o
UP T0 20%               1.50o/a
UP To 3oo/®              2.ooo/a
UP T0 40°/o              2.5oo/a
UP T0 50°/o              3.ooo/o
UP T0 60®/o              3.5oo/o
UP T0 7o°/o              4.ooo/a
5.000/a
(B) FOR    SMALL-SCALE    METALLIC    MINING    OPERATIONS.    --MINING
CONTRACTORS   0F   SMALL-SCALF   METALLIC   MINING   OPERATIONS
SHALL PAY T0 THE GOVERNMENT A ROYALTY EQUIVALENT TO ONE-
TENTH (I/10) OF ONE PERCENT (1%) OF GROSS OUTPUT;
(C) FOR THE PURPOSES OF THIS SHCTI0N, THE TERM -
(1)  A4HJiGAV   SHALL   MHAN   THu   RATIO   0F   INCOME   FROM   MINING
OPERATIONS BEFORE CORPORATE INCOME TAX TO GROSS OUTPUT.
a)  INcoME   FROM   MINING   opERATloNs   SHA:LL.   NIEA:IN   TFm   GRIoss
OUTPUT LESS DEDUCTIBLE EXPHNSES WHICH INCLUDES:
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(a)  MINING,    MILLING,    TRANSPORT    AND    HANDLING    I]XPENSES
TOGETHER WITH SMELTING AND REFINING COSTS OTHER THAN
SMELTING AND REFINING cOsTs PAID TO THIRD pARTms;
(b)  GHNERAL      AND      ADMINISTRATIVE      EXPENSFS      ACTUALLY
INCURRED BY THE MINING CONTRACTOR IN THE PHILIPPINES;
(c)  ENVIRONMENTAL   EXPENSES   OF   THE   MINING   CONTRACTOR,
INCLUDING   SUCH  EXPENSES  NECESSARY  T0  FULLY  COMPLY
WITH  ITS  ENVIRONMENTAL  OBLIGATIONS  AS  STIPULATED  IN
THE     ENVIRONMENTAL     PROTHCTI0N     PROVISION     0F    THE
MINERAL      AGREEMENT     OR     FINANCIAL     OR     THCHNICAL
A S SI STANCE       AGREE MENT       AND       I N       TH E       APPLICABLE
IMPLEMnNTING RULEs AND REGULATIONs;
(d)  EXPENSES FOR THE DEVELOPMENT 0F HOST AND NEIGHBORING
coMMUNITIEs AND FOR THE DEVELopMENT oF GnosclENCEs
AND  MINING  TECHNOLOGY,  INCLUDING  TRAINING  COSTS  AND
HXPHNSES  AS  STIPULATED  IN  THE  MINERAL  AGREEMHNT  OR
FINANCIAL  0R  TECHNICAL  ASSISTANCE  AGREHMENT  AND  IN
THE APPLICABLE IMPLEMFNTING RULES AND REGULATIONS;
(e)  ROYALTY  PAYMENTS  TO  CLAIM  OWNERS  OR  SURFACH  LAND
OWNERS   RELATING   T0   THE   CONTRACT   AREA   DURING   THE
OPERATING PERIOD, IF ANY;
®  cONTINulNG   ExpLORATION   AND   DEVELOpMENT   nxpENsl]s
wlTHIN   THE   CONTRACT   AREA   AFTER   THE   pRn-OPHRATING
PFRI0D;
(g)  INTERHST   EXPENSES   CHARGED   ON   LOANS   0R  SUCH   OTHER
FINANCING-RELATED   EXPENSES   INCURRED   BY   THE   MINING
CONTRACTOR  SUBJECT  T0  THE  FINANCING  REQUIRHMENT  IN
THE   MINERAL   AGREEMENT   0R   FINANCIAL   0R   THCHNICAL
ASSISTANCE  AGREEMENT,  WHICH  SHALL  NOT  BE  MORE  THAN
THE    PREVAILING    INTERNATIONAL    RATES    CHARGED    FOR
SIMILAR    TYPES    0F    TRANSACTIONS    AT    THE    TIME    THE
FINANCING   WAS  ARRANGED,  AND  WHERE   SUCH   LOANS  ARE
NECHSSARY FOR THE OPERATION;
(h)  DEPRECIATION, DEPLETION, AND AMORTIZATION;
(i)   TAXES, DUTIES, FHES, AND CHARGES; AND
a)  ALL    OTHER    COSTS    AND    EXPENSES    RELATED    T0    MINING
OPERATIONS AND SALE OF MINERALS AND MINERAL PRODUCTS.
(3) "iNtrvG  coIV7"c7ioR  SHALL  MEAN  A  OUALIFIED  pERSoN  ACTING
ALONE   0R  IN   CONSORTIUM  lhrll0   IS  A  PARTY   TO   A   NINERAL
AGREFMHNT     0R     FINANCIAL     AND     TECHNICAL     ASSISTANCE
AGREHMENT."
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1        SEC. 5. A new section shall be inserted as Section  151-8 of the National lnternal Revenue Code of
2        1997, as amended, to read as follows:
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«sE:c isi-B. mNDFALL pROFITs TAx -
IN   ADDITION   TO   THH   TAXIS   IMPOSED   UNDER  THIS   CODE,   THERE   IS
HEREBY IMPOSED FOR EACH TAXABLE YEAR A MARGIN-BASED WINDFALL
PROFITS     TAX     0N     INCOME     FROM     MINING     OPERATIONS     BEFORE
cORroRATE   INcOME   TAx,   IN   AccORDANCH   wlTH   THE   FOLLOwlNG
TABLE:   PRoyJDED,   THAT   IT   SHALL   BH   DEDUCTIBLH   FROM   TAXABLH
INCOME AS DEFINED IN SHCTI0N 31, CHAPTER V, TITLE 110F THIS CODE:
MARG IN                                            ROYALTY
MORE   THAN   35°/o   UP   TO    1%
400/a
MORE THAN 40°/a TO 450/o
MORE TIIAN 45% TO 50%
MORE THAN 50% TO 55%
MORH THAN 55®/a TO 60®/o
MORE THAN 60°/a TO 650/o
MORE THAN 650/a TO 700/o
MORE TIIAN 70% TO 75°/®
MORE TIIAN 75°/o TO 80%
MORE THAN 80°/a
SE;C. 6.  Each  Mining  Operation Treated as  a Separate  Tcunble  Entity. -Each mjhine apera:hon,
which  is subject to  a Mineral Agreement or Financial  or Technical Assistance Agreement,  shall be
treated as a separate taxable entity.  A mining contractor shall be treated as a separate taxpayer with
respect to each and or Technical every Mineral Agreement or Financial Assistance Agreement it holds
or is a party to.  If a Mineral Agreement or Financial or Technical Assistance Agreement is renewed,
the renewal shall be treated as part of the original agreement.
SEC. 7. Exe"p/j.o#;om Co##c7e#/I.cz/I.ty C/crwses. -Mining contractors for all metallic and nonmetallic
mining operations,  whether large-scale or small-scale,  shall  observe  fiscal transparency  and comply
with the requirements of the Extractive Industries Transparency Initiative (EITI) of goverrment, and,
for this  purpose.  shall  be  exempted  from  application  of the  confidentiality  clauses  of the  National
lnternal  Revenue Code  of 1997.  as amended,  including Section 270  in relation to  Section 71.  to the
extent of their participation in the EITI.
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28       SEC. 8.  Fiscal  Regime  Under  Financial  or  Technical  Assistance  Agreements  and  Other  Mineral
29       4greemc#ts. - The  fiscal  regime  provided herein and the  applicable terms and  conditit)us provided
30       under existing  laws  shall  be  embodied  in the  Mineral Agreements  and  into  Financial  or Teclmical
31        Assistance Agreements entered by the government.
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33        SEC.   9.   yes/ec7  Rz.gfots.   -   Valid   Mineral   Agreements   and   Financial   and   Technical   Assistance
34       Agreements  existing  prior  to  the  effectivity  of this  Act  shall  continue  to  be  governed  by  their
35       respective terms and conditions, except if these provide that terms and conditions resulting from repeal
or amendment of existing laws or regulations or from the enactment of a new law or regulation shall
be considered a part of said Financial and Technical Assistance Agreements and Mineral Agreements.
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39       EEC. IO. Registration of small-scale Miners f or Taxation purposes. -AI\ peTsous engztged in sma+1-
40       scale  mining activities  shall  register with  the  Mines  and  Geosciences  Bureau (MGB)  and with the
41        Mining Board of the concerned local government unit in accordance with Republic Act No. 7076 or
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the  "People's  Small-Scale  Mining Act of  1991,"  and  may  organize  themselves  into  cooperatives  in
order to qualify for the awarding of a people's small-scale mining contract.
The Mining Board shall submit an annual report to the MGB of all the small-scale mining contracts
entered into for the small-scale utilization of a plot of mineral land including the respective production
output, taxes and fees paid.
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8       For this purpose, a tax identification number shall be secured from the Bureau oflntemal Revenue as
9       a requirement for registration.
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\1       SE:C.11. Disposition of Royalties f or the Natural Resource Trust Fund. -The prowistons of edrsting
12        laws contrary notwithstanding, the to the revenues collected from the margin-based royalty paid by the
13        large-scale  metallic  mining  operations  outside  of mineral  reservations  shall  accrue  to  the  Natural
14       Resource Trust Fund under this Act.  The Bureau of Treasury shall create a Special Account on said
15        revenues and shall serve as its fund manager.
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17       The Natural Resource Trust Fund shall be remitted to the Bureau of Treasury within the first quarter of
18       the succeeding income year. The fund shall redound to the benefit of provinces, cities, municipalities,
19       and barangays directly affected by mining operations which shall commence three (3) years after the
20       effectivity of this Act, and every six (6) years thereafter.
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22       The Natural  Resource Trust Fund  shall be used by the local  government unit concerned to  support
23       educational programs, technological research programs of local relevance, disaster risk management,
24       rehabilitation of abandoned mines before the enactment of Republic Act No. 7942 or the "Philippine
25        Mining Act of 1995,"  and health  services programs of the communities  directly affected  by mining
26       activities:  Provz.ded,  That  the  Department  of Budget  and  Management,  in  consultation  with  the
27       Department of Environment and Natural Resources and the Department of Finance,  shall  issue rules
28       and regulations governing the allocation  and disbursement of the fund allocated to provinces,  cities,
29       municipalities, and barangays not later than one hundred and eighty (I 80) days from the effectivity of
30        this Act.
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32       SEC.12. Jmp/e"e#/I.#g Rzj/es cz#c7 Regr/crfj.our.  -The Department of Finance, after consultation with
33       other concerned government agencies, shall, within ninety (90) days from the effectivity of this Act,
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promulgate rules and regulations to implement the intent and provisions of this Act.
SE:C.13. Repealing Clause. -
(A) The  second  paragraph  of Section  5  of Republic  Act  No.  7942,  otherwise  known  as  the
Philippine Mining Act of 1995 is hereby amended to assign the Bureau of lntemal Revenue as
the collecting agent of the payment of royalty.
(8) Section  13  of Department of Environment and Natural Resources Administrative Order No.
2010-21    is   hereby   amended   insofar   as   it   governs   the   payment   of   5°/o   royalty   by
contractors/permit holders/lessees within mineral reservations.
(C) All  laws,  acts,  decrees,  executive  orders,  rules  and  regulations,  or parts thereof which  are
contrary  to   or   inconsistent   with   this  Act   are   hereby   repealed,   amended   or   modified
accordingly.
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50        SHC.  14. Sepczrcrbz./i.fy  C/cz"se.  ~  If any  provision  of this Act  is  held  unconstitutional  or invalid,  all
51        other provisions not affected thereby shall remain valid.
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SEC.  15. Ejorecfr.vz.ty. -This Act shall take effect fifteen (15) days after its publication in the O#cz.a/
Gaze//e or in a newspaper of general circulation.
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4                     Approved,
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