BAN
Republic of the Philippines [s* 5 D AN
USE OF REPRESENTATIVE CEI VE <
Be one 12 DEC 2013 a

Quezon City

SIXTEENTH CONGRESS
FIRST REGULAR SESSION \

3586

HOUSE BILL NO.

Introduced by HON. SILVESTRE H. BELLO and HON. LINO S. CAYETANO

EXPLANATORY NOTE

Section 2, Article XII of the 1987 Constitution provides that “All lands of the public
domain, waters. minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources
are owned by the State, With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State, The State may
directly undertake such activities, or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or associations at
least sixty per centym of whose capital is owned by such citizens,”

In the aforementioned Section it further states that “The President may enter into
agreements with foreign-owned corporations involving either technical of financial
assistance for large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils according to the general terms and conditions provided
by law, based on real contributions to the economic growth and general welfare of the
country.”

‘The bone of contention has always been the real contributions to the economic growth
and, general welfare. It is undeniable that the mineral industry makes significant
contributions to the country’s socio-economic growth, But the question remains as to
whether this significant contribution translates to more revenues and profit for the State
as the owner of the resources. On the other hand, there is also the need to temper the
regulatory environment so as not to drive away but attract more investments into the
field, considering that there is yet a largely untapped vast mineral wealth in the
archipelago. Support for the mineral industry also redounds to the benefit of a lot of other
downstream industries as well.

This Bill seeks to find that middle ground, of taking into consideration the better interests
of the State and that of the Contractor as well, so that this real contribution shall be felt
by most, if not all. This Bill seeks to promote and promulgate a mineral resource fiscal
regime that shall give the State its fair share in its mineral resources and, at the same
time, encourage and support more investments, both foreign and local.

Thus, approval of this Bill is eamestly sought.

AY

HON, SILVES: ‘LLO HON. LINO S. CAYETANO


3586
EXPLANATORY NOTE

Section 2, Article XII of the 1987 Constitution provides that “All lands of the public
domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources
are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated, ‘The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State, The State may
directly undertake such activities, or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or associations at
least sixty per centum of whose capital is owned by such citizens.”

In the aforementioned Section it further states that “The President may enter into
agreements with foreign-owned corporations involving either technical of financial
assistance for large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils according to the general terms and conditions provided
by law, based on real contributions to the economic growth and general welfare of the
country.”

The bone of contention has always been the real contributions to the economic growth
and general welfare, It is undeniable that the mineral industry makes significant
contributions to the country’s socio-economic growth. But the question remains as to
whether this significant contribution translates to more revenues and profit for the State
as the owner of the resources. On the other hand, there is also the need to temper the
regulatory environment so as not to drive away but attract more investments into the
field, considering that there is yet a largely untapped vast mineral wealth in the
archipelago. Support for the mineral industry also redounds to the benefit of a lot of other
downstream industries as well.

This Bill seeks to find that middle ground, of taking into consideration the better interests
of the State and that of the Contractor as well, so that this real contribution shall be felt
by most, if not all, This Bill secks to promote and promulgate a mineral resource fiscal
regime that shall give the State its fair share in its mineral resources and, at the same
time, encourage and support more investments, both foreign and local.

Thus, approval of this Bill is eamestly sought.


Congress of the Philippines
Metro Manila

House Bill No,_ 3586

AN ACT
RATIONALIZING REVENUE SHARING IN THE LARGE-SCALE METALLIC
MINERAL RESOURCE INDUSTRY, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

CHAPTERI
GENERAL PROVISIONS

Section 1. Title. -- This Act shall be known as the “Philippine Mineral Resource
Revenue Sharing Act of 2013"

Section 2. Declaration of Polic

a. All mineral resources in public and private lands within the national territory of the
Republic of the Philippines are owned by the State.

b. The State shall have a fair, adequate, and equitable share of the economic benefits
derived from mineral resources to contribute to the development of the country.

c. The State shall promulgate a fiscal regime for the large scale exploration,
development, and commercial utilization of metallic mineral resources in the country
that shall apply both to the Government and to the Contractor.

d. ‘The State shall encourage and support investments in the large-scale metallic mineral
resource industry, in order to maximize the generation of revenues as provided for
under this Act.

Section 3. Definition of Terms. -- As used herein, the following terms shall be defined as
follows:

a. "Contractor means a qualified person acting alone or in consortium who is a party to
a Mineral Agreement or to a Financial or Technical Assistance Agreement.

b. "Financial or Technical Assistance Agreement" means a contract involving financial
or technical assistance for large-scale exploration, development, and utilization of
mineral resources, as provided for under Republic Act No. 7942, otherwise known as
the Philippine Mining Act of 1995.

©. “Government Share” shall be the Government Royalty, Corporate Income Tax, and
Special Mines Tax, which shall be in lieu of all national and local taxes, royalties,
duties, fees and charges, except fees and charges imposed by the Department of
Environment and Natural Resources (DENR)-Mines and Geosciences Buerau
(MGB).

“Mines and Geosciences Bureau” (MGB) refers to the attached agency of the DENR,
pursuant to Executive Order No. 192, June 1987.



e. "Mineral Agreement" means a contract between the Government and a Contractor,
involving Mineral Production Sharing Agreement, Co-production agreement, or
Joint-venture agreement as contemplated under Republic Act No. 7942, otherwise
known as “The Philippine Mining Act of 1995”.

f “Net Mining Revenue" means the Sale Price applied to the payable metal content,
less applicable treatment and refining charges, freight and insurance. The payable
content and any price adjustments shall be based on standard market practices
applicable to the sale of particular metals or ores.

2. “Philippine Economic Zone Authority (PEZA)” refers to the attached agency of the
Department of Trade and Industry (DTI) created under Republic Act No. 7916 as
amended by Republic Act No. 8748.

‘Sale Price” means the price as agreed between the Contractor and a buyer for the
sale of metals or ores, which shall be based on metal prices quoted in recognized
international metal exchanges over the agreed quotational or averaging periods, or in
the case of the sale of ores that are valued on a per ton basis, at a price that is
considered to be in line with market conditions at the time of sale.

CHAPTER IL
SCOPE OF APPLICATION

Section 4. Scope. -- This Act shall govern and apply to new Mineral Production and
Sharing Agreements (MPSAs) and Financial or Technical Assistance Agreements (FTAAs) that
are entered into after the effectivity of this Act.

Section 5. Government Share in Other Mineral Agreements, -- The share of the
Government in Co-production and Joint-venture agreements shall be negotiated by the
Government and the Contractor as prescribed in Section 81 of Republic Act No. 7942, otherwise
known as the Philippine Mining Act of 1995.

CHAPTER
GOVERNMENT SHARE

Section 6. Composition of Government Share. -- The Government Share in the
exploration, development, and utilization of mineral resources shall be in the form of
Government Royalty, Corporate Income Tax, and Special Mines Tax.

Scetion 7. Government Royalty. -- A royalty shall be levied, assessed and collected on

metallic minerals and ores extracted and sold, as follows:

a. OnGold, a variable rate of between 2% to 5% of Net Mining Revenue, in
accordance with the Sales Price in the following schedule:

Gold Price $/oz. Rate
Below $1,440/oz. 2%
$1,440/o0z. to $1,800/0z. 3%

Above $1,800/oz. to $2,200/oz. 4%
Above $2,200/oz. 53%


b. On Copper, a variable rate of between 2% to 5% of Net Mining Revenue,
in accordance with the Sales Price in the following schedule:

Copper Price $/Ib. Rate
Below $2.50/lb. 2%
$2.50/Ib. to $3.50/Ib. 3%
Above $3.50/Ib. to $4.40/Ib. 4%
Above $4.40/Ib. 5%

c. OnNickel, Chromite, and other metallic minerals and ores;

i, Ifextracted within proclaimed mineral reservations: a fixed royalty
of 7% of Net Mining Revenue

ii, If extracted outside of proclaimed mineral reservations: a fixed
royalty of 4% of Net Mining Revenue;

For avoidance of doubt, Section 151(A)(3) of Republic Act No. 8424, otherwise known
as the National Internal Revenue Code of 1997, is hereby repealed insofar as it does not impair
or diminish vested rights and obligations.

Section 8. Corporate Income Tax. -- The income tax shall be paid by the Contractor to
the Government in accordance with Republic Act No. 8424, otherwise known as the National
Internal Revenue Code of 1997.

Section 9. Special Mines Tax. -- The Contractor shall also pay a Special Mines Tax
equivalent to Five Percent (5%) of the Contractor's taxable income as defined under Republic
‘Act No. 8424, otherwise known as the National Internal Revenue Code of 1997.

Section 10. incentives. - The Contractor shall be granted the following incentives:
a, Accelerated depreciation and depletion over a five-year period;

b. Duty-free imports of equipment for mine and plant development;

c. Vat zeto-rating of importations and local purchases of goods and services:

Section 11. Allowable Deduction. -- Section 34 of Republic Act No. 8424, otherwise
known as the National Internal Revenue Code of 1997, is hereby amended as follows:

“Chapter VII — Allowable Deduction

F. Depreciation

XXX OXKX XK

XXX XXX XXX
(5) Depreciation of Properties Used in Mining Operations. - an
allowance for depreciation in respect of all properties used in
mining operations other than petroleum operations, shall be
computed at_a_rate of five (5) years and the depreciation
thereon allowed as deduction from taxable income.

G. Depletion of Oil and Gas Wells and Mines. -
XXX XXX__XXX
(2) Election to Deduct Exploration and Development Expenditures.
- In computing taxable income from mining operations, the
taxpayer may at his option, deduct exploration and development
expenditures accumulated as cost or adjusted basis for cost
depletion as of date of prospecting, as well as exploration and


development expenditures paid or incurred during the taxable year
in the form of depletion over a period of five (5) years.”

For avoidance of doubt, Section 34 of Republic Act No. 8424, otherwise known as the
National Internal Revenue Code of 1997, is hereby amended, insofar as it does not impair or
diminish vested rights and obligation:

CHAPTE!
ALLOCATION OF GOVERNMENT SHARE

Section 12. Allocation of Government Share. -- The Government Share shall be allocated
as follows

a.) National Government: Sixty Petcent (60%), payable to the Bureau of Internal
Revenue;

b.) Local Government Units hosting the mining operations:

Fifteen percent (15%) for the provincial government;
Fifteen percent (15%) for the municipal/city government;
Ten percent (10%) for the barangay;

If the mine is in a highly urbanized/independent component city, the city will get
thirty percent (30%),

If the mining operation is in two or thore provinces, or in two or more component
cities or municipalities, or in two or more highly urbanized or independent
component cities or in two of more barangays, their respective shares are
distributed according to their population with a weight of twenty percent (20%),
land area with a weight of twenty percent (20%), and area of mine occupancy
with a weight of sixty percent (60%).

The share of the LGU shall be directly remitted by the Contractor to the LGU.

If the contract area is in an ancestral land/domain covered by Certificate of
Ancestral Domain Title/Certificate of Ancestral Land Title (CADT/CALT), the
royalties for ICCs shall be One Percent (1%) of Net Mining Revenue, taken from
the Government Share. Thereafter, the Government Share shall be allocated in
accordance with the abov« ted ratio,

tion 13. Payment of Government Share. ~ The Government Share shall be payable as

follows:

a, Government Royalty and any royalty that may be due to ICCs, within twenty (20)
days from the end of each quarter;

fe (45) days from

b. The Corporate Income Tax, within Forty-F

the end of each quarter;

UTILIZATION OF GOVERNMENT SHARE,

Section 14. Utilization of Local Government Unit Shares. -- LGUs, in util
share, shall give priority to local economic development including health, edu
livelihood projects or activities.



Section 15. Utilization of Indigenous Cultural Community Shares. -- The royalty
payments to ICCs shall be utilized in accordance with Republic Act No. 8371, otherwise known
as the Indigenous Peoples’ Rights Act, and other relevant issuances,

CHAPTER VI
ORGANIZATIONAL AND INSTITUTIONAL ARRANGEME)

Section 16. Mining Areas
shall be declared as economic zones based on a favorable
certification of the MGB shall be in lieu of all the nec
the ICCs concerned inasmuch
of the Mineral Agreements or

s Economic Zones. ~~ All mining areas governed by this Act
i ied by the MGB. The
's from the LGUs and

tion 17. Administration and Regulation of Mining Activities. -- The MGB
administer and regulate 1 including the grant of permits relating to the mining
project. The duties and responsibilities assigned to the DENR as promulgated in the 1987
Philippine Constitution and mandated by virtue of its competence and expertise shall continue to
be under the purview of the DENR.

Section 18. Administration of Mining Ecozones. -- The Philippine Economic Zone
Authority (PEZA) PEZA shall be responsible for issuance of business permits, construction
permits and the like, pursuant to the establishment of the mining economic zones.

Section 19. Implementing Rules and Regulations. -- An inter-agency committee shall,
within ninety (90) days from the effectivity of this Act, promulgate rules and regulations to
implement the intent and provisions of this Act.

‘The said committee shall be composed of the following officials or their duly authorized
representative:

a.) Secretary of the Department of Trade and Industry as Chair;
b.) Secretary of the Department of Environment and Natural Resources as Co-Chair:
c.) Secretary of the Department of Finance as Member;

.) Secretary of the Department of Interior and Local Government as Member;

e.) Secretary of the National Economic Development Authority as Member;

£.) Secretary of the Department of Budget and Management as Member;

g.) Governor of the DTI-Board of Investments as Member

h.) Chairman of the National Commission on Indigenous Peoples as Member;

CHAPTER VIL
TRANSITORY AND MISCELLANEOUS PROVISIONS

Section 20. Recognition of Valid and Existing Rights. -- Holders of valid and existing
Mineral Agreements or FTAAs shall continue to be governed by the terms and conditions
contained in their respective mining contracts: Provided, however, that holders of valid and
sting Mineral Agreements or FTAAS may opt to be governed by this Act, which option, once
made, shall be final and irrevocable.

Section 21. Applicability of the Provisions of the Mining Act. -- Republic Act No. 7942,
otherwise known as the Philippine Mining Act of 1995, shall continue to be applicable for
Mineral Agreements and FTAAS approved under this Act except the following provisions:

a.) Section 80 (Government Share in Mineral Production Sharing Agreement),


ik

b.) Section §| (Govetiittent Share in Other Mineral Agreements) paragraph relating to
the government shate in financial or technical assistance agreement,

¢.) Section 82 (Allocation of Government Share),

4d.) Section 83 (Income Taxes),

e.) Section 84 (Excise Tax on Mineral Products),

f.) section 86 (Occupation Fees),

2.) Section 87 (Manner of Payment of Fees),

h,) Section 88 (Allocation of Occupation Fees),

i.) Section 90 (Incentives),

j). Section 91 (Incentives for Pollution Control Devices),

k.) Section 92 (Income Tax-Carry Forward of Losses),

1) Section 93 (Income Tax-Accelerated Depreciation), and

m,) Such other provisions not consistent with this Act.

Section 22. Repealing Clause
and executive orders inconsistent with the pro
modified accordingly.

Any provisions of other existing laws, rules, decrees,
of this Act are hereby repealed and

If any provision of this Act is subsequently declared
in full force and

Section 23. Separability Clause.
unconstitutional, the validity of the remaining provisions hereof shall remai
effect.

Section 24. Lffectivity Clause. -- This Act shall take effect on

AA

HON. LINO S, CAYETANO