SHVLNTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
Third Regular Session
SENATE
0 (if i l j f  tf 'i- c u 't.i r ;*
'19 HAY 28 P3 32
s .  M g . -2235 
RECEiV L b .
(In substitution of S.B. Nos. 225, 927, and 1979 taking into consideration
H.B. No. 8400)
Prepared by the Committee on Ways and Means with Senators Drilon, Recto, Sotto
III, and Angara as authors
AN ACT
ESTABLISHING THE FISCAL REGIME FOR THE MINING INDUSTRY
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled:
1 
SECTION 1. The chapter title of Chapter VII Title VI of the National Internal
2 
Revenue Code of 1997, as amended, is hereby amended to read as follows:
3
4
"CFIAPTER VII - [EXCISE TAX ON MINERAL PRODUCTS] TAXATION OF 
MINERAL PRODUCTS/'
5 
SEC. 2. Sec. 151 of Chapter VII, Title VI of the National Internal Revenue Code of
6 
1997, as amended, is hereby amended to read as follows:
7 
"SEC. 151. TAX ON Mineral Products.
8 
SEC. 3. A new section designated as Section 151-A under Chapter VII, Title VI of
9 
the National Internal Revenue Code of 1997, as amended, is hereby inserted and shall 
10 
read as follows:
11
"SEC. 151-A. ROYALTY. -
12
13
14
15
A. FOR ALL LARGE-SCALE METALLIC MINING OPERATIONS OUTSIDE 
OF MINERAL RESERVATIONS. - MINING CONTRACTORS OF LARGE- 
SCALE METALLIC MINING OPERATIONS OUTSIDE OF MINERAL 
RESERVATIONS SHALL PAY TO THE GOVERNMENT A MARGIN-BASED
1


2
1
ROYALTY ON INCOME FROM MINING OPERATIONS IN ACCORDANCE 
WITH THE FOLLOWING TABLE:
MARGIN
ROYALTY
1% UP TO 10%
1.00%
ABOVE 10% UP TO 20%
1.50%
ABOVE 20% UP TO 30%
2.00%
ABOVE 30% UP TO 40%
2.50%
ABOVE 40% UP TO 50%
3.00%
ABOVE 50% UP TO 60%
3.50%
ABOVE 60% UP TO 70%
4.00%
ABOVE 70%
5.00%
3
4
5
6
7
8 
9
B. FOR LARGE-SCALE METALLIC MINING OPERATIONS WITHIN 
MINERAL RESERVATIONS. - MINING CONTRACTORS OF LARGE- 
SCALE 
METALLIC 
MINING 
OPERATIONS 
WITHIN 
MINERAL 
RESERVATIONS SHALL PAY TO THE GOVERNMENT A ROYALTY 
EQUIVALENT TO THREE PERCENT (3%) OF THE GROSS OUTPUT OF 
THE MINERALS OR MINERAL PRODUCTS EXTRACTED OR PRODUCED 
BY THE MINING OPERATIONS, EXCLUSIVE OF ALL OTHER TAXES;
10
11
12
13
14
15
C. FOR SMALL-SCALE METALLIC MINING OPERATIONS WITHIN OR 
OUTSIDE MINERAL RESERVATIONS. - MINING CONTRACTORS OF 
SMALL-SCALE 
METALLIC 
WITHIN 
OR 
OUTSIDE 
MINERAL 
RESERVATIONS SHALL PAY TO THE GOVERNMENT A ROYALTY 
EQUIVALENT TO ONE TENTH (1/10) OF ONE PERCENT (1%) OF GROSS 
OUTPUT;
16
D. FOR PURPOSES OF THIS SECTION AND SECTION 151-B, THE TERM
17
18
(1) 'MARGIN' SHALL MEAN THE RATIO OF INCOME FROM MINING 
OPERATIONS BEFORE CORPORATE INCOME TAX TO GROSS OUTPUT;
19
20 
21
(2) 'GROSS OUTPUT' SHALL MEAN THE ACTUAL MARKET VALUE OF 
MINERALS OR MINERAL PRODUCTS FROM EACH MINE OR MINERAL 
LAND 
OPERATED 
AS 
A 
SEPARATE 
ENTITY, 
WITHOUT 
ANY


2
3
4
5
6
7
8 
9
10
11
12
13
14
15
16
1
DEDUCTION FOR MINING, PROCESSING, REFINING, TRANSPORTING, 
HANDLING, MARKETING OR ANY OTHER EXPENSES: PROVIDED, 
THAT OF THE MINERALS OR MINERAL PRODUCTS SOLD OR 
CONSIGNED ABROAD BY THE MINING CONTRACTOR UNDER COST, 
INSURANCE OR FREIGHT (CIF) TERMS, THE ACTUAL COST OF OCEAN 
FREIGHT AND INSURANCE SHALL BE DEDUCTED: PROVIDED,
FURTHER, THAT IN THE CASE OF MINERAL CONCENTRATES WHICH 
ARE NOT TRADED IN COMMODITY EXCHANGES IN THE PHILIPPINES 
OR ABROAD, SUCH AS COPPER CONCENTRATES, THE ACTUAL 
MARKET VALUE SHALL BE WORLD PRICE QUOTATIONS OF THE 
REFINED MINERAL PRODUCTS CONTENT THEREOF PREVAILING IN 
THE SAID COMMODITY EXCHANGES, AFTER DEDUCTING THE 
SMELTING, REFINING, TREATMENT, INSURANCE, TRANSPORTATION 
AND OTHER CHARGES INCURRED IN THE PROCESS OF CONVERTING 
MINERAL CONCENTRATES INTO REFINED METAL TRADED IN THOSE 
COMMODITY EXCHANGES;
17
18
19
20 
21 
22
(3) TNCOME FROM MINING OPERATIONS' SHALL MEAN THE GROSS 
OUTPUT LESS DEDUCTIBLE EXPENSES, WHICH INCLUDE:
(A) MINING, MILLING, TRANSPORT AND HANDLING EXPENSES 
TOGETHER WITH SMELTING AND REFINING COSTS OTHER 
THAN SMELTING AND REFINING COSTS PAID TO THIRD 
PARTIES;
23
24
(B) GENERAL AND ADMINISTRATIVE EXPENSES ACTUALLY 
INCURRED BY THE MINING CONTRACTOR IN THE PHILIPPINES;
25
26
27
28
29
30
31
(C) 
ENVIRONMENTAL 
EXPENSES 
OF 
THE 
MINING 
CONTRACTOR, INCLUDING SUCH EXPENSES NECESSARY TO 
FULLY COMPLY WITH ITS ENVIRONMENTAL OBLIGATIONS AS 
STIPULATED 
IN 
THE 
ENVIRONMENTAL 
PROTECTION 
PROVISION OF THE MINERAL AGREEMENT OR FINANCIAL OR 
TECHNICAL 
ASSISTANCE 
AGREEMENT 
AND 
IN 
THE 
APPLICABLE IMPLEMENTING RULES AND REGULATIONS;


2
3
4
5
6 
7
1
(D) 
EXPENSES 
FOR THE DEVELOPMENT OF HOST AND 
NEIGHBORING COMMUNITIES AND FOR THE DEVELOPMENT 
OF GEOSCIENCES AND MINING TECHNOLOGY, INCLUDING 
TRAINING COSTS AND EXPENSES AS STIPULATED IN THE 
MINERAL 
AGREEMENT 
OR 
FINANCIAL 
OR 
TECHNICAL 
ASSISTANCE 
AGREEMENT 
AND 
IN 
THE 
APPLICABLE 
IMPLEMENTING RULES AND REGULATIONS;
8
9
10
11
12
13
(E) ROYALTY PAYMENTS TO CLAIMOWNERS OR SURFACE LAND 
OWNERS RELATING TO THE CONTRACT AREA DURING THE 
OPERATING PERIOD, IF ANY;
(F) CONTINUING EXPLORATION AND DEVELOPMENT EXPENSES 
WITHIN THE CONTRACT AREA AFTER THE PRE-OPERATING 
PERIOD;
14
15
16
17
18
19
20 
21 
22
(G) INTEREST EXPENSES CHARGED ON LOANS OR SUCH OTHER 
FINANCING RELATED EXPENSES INCURRED BY THE MINING 
CONTRACTOR SUBJECT TO THE FINANCING REQUIREMENT IN 
THE MINERAL AGREEMENT OR FINANCIAL OR TECHNICAL 
ASSISTANCE AGREEMENT, WHICH SHALL NOT BE MORE THAN 
THE PREVAILING INTERNATIONAL RATES CHARGED FOR 
SIMILAR TYPES OF TRANSACTIONS AT THE TIME THE 
FINANCING WAS ARRANGED, AND WHERE SUCH LOANS ARE 
NECESSARY FOR THE OPERATION;
23
(H) DEPRECIATION, DEPLETION, AND AMORTIZATION;
24
(I) 
TAXES, DUTIES, FEES, AND CHARGES; AND
25
26 
27
(J) ALL OTHER COSTS AND EXPENSES RELATED TO MINING 
OPERATIONS 
AND 
SALE 
OF 
MINERALS 
AND 
MINERAL 
PRODUCTS.
28
29
(4) 'MINING CONTRACTOR' SHALL MEAN A QUALIFIED PERSON 
ACTING ALONE OR IN CONSORTIUM WHO IS A PARTY TO A MINERAL


2
1
AGREKMtNT 
OR 
FINANCIAL 
OR 
TECHNICAL 
ASSISTANCE 
AGREEMENT"
3 
SEC. 4. A new section designated as Section 151-B under Chapter VII, Title VI of
4 
the National Internal Revenue Code of 1997, as amended, is hereby inserted and shall
5 
read as follows;
6 
"SEC. 151-B. WINDFALL PROFITS TAX. -
7
8 
9
10
11
12
13
(A) IN ADDITION TO THE TAXES IMPOSED UNDER THIS CODE,
THERE IS HEREBY IMPOSED FOR EACH TAXABLE YEAR A MARGIN- 
BASED WINDFALL PROFITS TAX ON INCOME FROM MINING 
OPERATIONS BEFORE CORPORATE INCOME TAX, IN ACCORDANCE 
WITH THE FOLLOWING TABLE: PROVIDED, THAT IT SHALL BE 
DEDUCTIBLE FROM TAXABLE INCOME, AS DEFINED IN SECTION 31, 
CHAPTER V, TITLE II OF THIS CODE:
MARGIN
RATE
MORE THAN 35% UP TO 40%
1%
MORE THAN 40% UP TO 45%
2%
MORE THAN 45% UP TO 50%
3%
MORE THAN 50% UP TO 55%
4%
MORE THAN 55% UP TO 60%
5%
MORE THAN 60% UP TO 65%
6%
MORE THAN 65% UP TO 70%
7%
MORE THAN 70% UP TO 75%
8%
MORE THAN 75% UP TO 80%
9%
MORE THAN 80%
10%
14 
SEC. 5. Section 34 (B) of Chapter VII, Title II of the National Internal Revenue Code
15 
of 1997, as amended, is hereby further amended to read as follows:
16 
"SEC. 34. DEDUCTIONS FROM GROSS INCOME. - xxx
17 
(A) Expenses. - xxx
18 
(B) Interest. -
5


2
3
4
1
(1) XXX
(2) XXX
(3) XXX
(4) LIMITATION OF DEDUCTIONS FOR MINING CONTRACTORS:
5
6
7
8 
9
10
11
(A) IF A MINING CONTRACTOR HAS A DEBT-TO-EQUITY RATIO 
IN EXCESS OF THREE (3) TO ONE (1) AT ANY TIME DURING A 
TAXABLE YEAR, A DEDUCTION IS DISALLOWED AS A TAX- 
DEDUCTIBLE EXPENSE FOR THE INTEREST PAID BY THE MINING 
CONTRACTOR DURING THAT YEAR ON THAT PART OF THE 
DEBT THAT EXCEEDS THE THREE (3) TO ONE (1) RATIO FOR THE 
PERIOD THE RATIO WAS EXCEEDED;
12
13
14
15
16 
17
(B) IF THE DEBT-TO-EQUITY RATIO OF A MINING CONTRACTOR 
EXCEEDS THREE (3) TO ONE (1) FOR AN INCOME YEAR, 
SUBSECTION (1) DOES NOT APPLY IF, AT ALL TIMES, DURING 
THE YEAR, THE AMOUNT OF THE DEBT OF THE MINING 
CONTRACTOR DOES NOT EXCEED THE ARM'S LENGTH DEBT 
AMOUNT;
18
19
20 
21 
22 
23
(C) FOR PURPOSES OF THIS SECTION, THE TERM 'ARM'S LENGTH 
DEBT AMOUNT', SHALL MEAN THE AMOUNT OF DEBT THAT A 
BANK THAT 
IS 
NOT 
AN 
ASSOCIATE OF THE MINING 
CONTRACTOR WOULD BE PREPARED TO LEND TO THE MINING 
CONTRACTOR HAVING REGARD TO ALL THE CIRCUMSTANCES 
OF THE MINING CONTRACTOR;
24
25
26
27
28
29
30
31
32
THE TERM 'ASSOCIATE', SHALL MEAN ANY OTHER PERSON 
WHO ACTS OR MAY ACT IN ACCORDANCE WITH THE 
DIRECTIONS, REQUESTS, SUGGESTIONS, OR WISHES OF THE 
FIRST-MENTIONED 
PERSON, 
AND 
THE FIRST-MENTIONED 
PERSON IS AN ASSOCIATE OF THE SECOND MENTIONED 
PERSON;
THE TERM DEBT', SHALL MEAN THE GREATEST AMOUNT, AT 
ANY TIME DURING AN 
INCOME YEAR, 
OF THE 
DEBT 
OBLIGATIONS OF THE MINING CONTRACTOR ON WHICH


2
1
INTEREST IS PAYABLE AS DETERMINED ACCORDING TO 
INTERNATIONAL FINANCIAL REPORTING STANDARDS;
3
4
5
6
7
8 
9
THE TERM 'DEBT OBLIGATION' SHALL MEAN AN OBLIGATION 
TO MAKE A REPAYMENT OF MONEY TO ANOTHER PERSON, 
INCLUDING AN OBLIGATION ARISING UNDER A PROMISORY 
NOTE, BILL OF EXCHANGE, OR BOND, BUT NOT INCLUDING 
ACCOUNTS 
PAYABLE 
OR 
AN 
OBLIGATION 
TO 
MAKE 
REPAYMENT OF MONEY IN RESPECT OF WHICH NO INTEREST IS 
PAYABLE;
10
11
12
13
14
15
THE TERM 'EQUITY', SHALL MEAN THE GREATEST AMOUNT, AT 
ANY TIME DURING AN INCOME YEAR, OF THE EQUITY OF THE 
MINING CONTRACTOR AS DETERMINED ACCORDING TO 
INTERNATIONAL FINANCIAL REPORTING STANDARDS AND 
INCLUDES AN OBLIGATION TO MAKE A REPAYMENT OF MONEY 
IN RESPECT OF WHICFI NO INTEREST IS PAYABLE.
16
17
18
19
20 
21 
22
23
24
25
26
27
28
29
30
(C) Taxes. - xxx
(D) Losses. - xxx
(E) Bad Debts. - xxx
(F) Depreciation. - xxx
(G) Depletion of Oil and Gas Wells and Mines. - 
x x x
(H) Charitable and Other Contributions. - 
x x x
(I) Research and Development. - 
x x x
0) Pension Trusts, - x x x
(K) Additional Requirements for Deductibility of Certain Payments, - x x x
(L) Optional Standard Deduction, - x x x
Premium Payments on Health and/or Hospitalization Insurance of an Individual 
Taxpayer, - xxx"
31
32
SEC. 6. Each Mining Operation Treated as a Separate Taxable Entity. - Each 
mining operation, which is subject to a Mineral Agreement or Financial or Technical


1 
Assistance Agreement shall be treated as a separate taxable entity. A mining contractor
2 
shall be treated as if a separate taxpayer with respect to each and every Mineral
3 
Agreement or Financial or Technical Assistance Agreement it holds or is a party to.
4 
If Mineral Agreement or Financial or Technical Assistance Agreement is renewed,
5 
the renewal shall be treated as part of the original agreement.
6 
SEC. 7. Exemption from Confidentiality Clause. - Mining contractors for all
7 
metallic anci non-metallic mining operations, whether large-scale or small-scale, shall
8 
observe fiscal transparency and comply with the requirements of the Extractive
9 
Industries Transparency Initiative (EITI), and, for this purpose, shall be exempted from
10 
application of the confidentiality clauses of the National Internal Revenue Code of 1997,
11 
as amended, including Section 270 in relation to Section 71, to the extent of their
12 
participation in EITI.
13 
SEC. 8. Fiscal Regime Under Financial or Technical Assistance Agreements and
14 
Other Mineral Agreements. - The fiscal regime provided herein and the applicable terms
15 
and conditions provided under existing laws shall be embodied in the Mineral
16 
Agreements or Financial or Technical Assistance Agreements entered into by the
17 
government.
18 
SEC. 9. Vested Rights. - Valid Mineral Agreements or Financial or Technical
19 
Assistance Agreements existing prior to the effectivity of this Act that do not provide
20 
that any terms and conditions resulting from the repeal or amendment of any existing
21 
laws and regulations or from the enactment of a new law or regulation shall be
22 
considered a part of said Mineral Agreement and Financial or Technical Assistance
23 
Agreements, shall continue to be governed by their existing terms and conditions.
24 
SEC. 10. Registration of Small-Scale Miners. - All persons undertaking small-scale
25 
mining activities shall register as miners with the Mining Board of the concerned local
26 
government unit in accordance with Republic Act No. 7076, "An Act Creating a People's
27 
Small-Scale Mining Program and For Other Purposes" and with the Mines and
28 
Geosciences Bureau (MGB) and may organize themselves into cooperatives in order to
29 
qualify for the awarding of a people's small- scale mining contract.


1 
The Mining Board shall submit an annual report to the MGB of all the small-scale
2 
mining contracts entered into for the small-scale utilization of a plot of mineral land
3 
including the respective production output, taxes and fees paid.
4 
For this purpose, a tax identification number shall be secured from the Bureau of
5 
Internal Revenue as a requirement for registration.
6 
SEC. 11, Implementing Rules and Regulations. - The Department of Finance, after
7 
consultation with other concerned government agencies, shall, within ninety (90) days
8 
from the effectivity of this Act, promulgate rules and regulations to implement the
9 
intent and provisions of this Act.
10 
SEC. 12. Repealing Clause. - All laws, decrees, executive orders, rules and
11 
regulations, or parts thereof, which are contrary to or inconsistent with this Act are
12 
hereby repealed, amended or modified accordingly.
13 
SEC. 13. Separability Clause. - If any provision of this Act so declared
14 
unconstitutional or invalid, other parts or provisions hereof not affected thereby shall
15 
continue to be in full force and effect.
16 
SEC. 14. Effectiinty. - This Act shall take effect fifteen (15) days after its
17 
publication in the Official Gazette or in a newspaper of general circulation in the
18 
Philippines.
Approved,