June 01, 2005 | By Keith Martin in Washington, DC
CHILE imposed a new royalty tax on mining companies.
The Chilean Congress passed the tax by a wide margin on May 18.
It is a tax of as much as 5% on annual income from sales of ore from mines leased from the government. However, some costs of earning the income — like accelerated depreciation of mining equipment — that are deductible for purposes of calculating corporate income taxes would not be deductible against the tax base for the royalty tax.
The tax rate varies depending on annual sales. Companies that produce less than 12 metric tons of ore a year are exempted. The rates move from 0.5% to 4.5% as output increases from 12 to 50 metric tons. The tax rate for companies with more than 50 metric tons in annual output is 5%.
Larger mining companies will see their tax rates increase in Chile from 35% to 38.5% after the new tax is combined with the existing corporate income tax.