Global Tax Alert (News from Americas Tax Center) | 25 October 2013

Uruguay enacts large scale mining law

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Uruguay enacted Law No. 19,126 (the Law) on 11 September 2013, which applies to large scale mining exploitations. The Law became effective on 25 September 2013.


The primary goal of this law is to allow a large scale mining project, only if, the safety of the environment is guaranteed during the mining process, closing and post-closing of the mines. Large scale mining projects are required to be located in rural areas and, when the owner of the project is a Uruguayan corporation, its capital must only be expressed through non-bearer registered shares.

Under the law, the Executive Power shall define the existence of large scale mining when an individual project or a combination of projects of a single company or economic group complies with at least one of the following conditions:

  • Surface extension that exceeds 400 hectares
  • Investments that exceed 830 million indexed units in the phase of construction and set up of the infrastructure necessary for exploitation or
  • Annual sales value (domestic sales or exports) of products derived from the mining activity that exceeds 830 million indexed units.

Additionally, under special circumstances, the Executive Power shall be empowered to qualify projects as large scale mining if any of these conditions occur:

  • Dangerous chemical substances or products are used
  • Energy requirements exceed 500 GWh within a year
  • Drainage acids are produced

Special tax regulations

Exclusion of promotional activities benefits

Investments performed in connection with large scale mining projects cannot benefit from any promotional activity regimes derived from the grant of corporate income tax exemptions.

Corporate income tax modifications

Prospecting, exploration and environmental studies costs incurred by project owners before the concession grant should be considered as fixed assets. These capitalized costs may turn into losses in the first year in which production begins or be amortized at a flat rate over a period of five years.

Creation of additional corporate income tax

The Law creates an additional corporate income tax that will be imposed on the income obtained by large scale mining concession beneficiaries from mining exploitation activities.

The mining operative income subject to this additional tax is calculated as the mining production gross sales net of any returns, allowances and discounts according to the market's common use and customs. This mining operative income cannot be lower than the reference price that the Executive Power will establish monthly for each mining product, according to international market prices.

Furthermore, the law states that the additional corporate income tax will not be deductible for corporate income tax purposes.

The operational mining gross income (OMGI) is calculated as the difference between operational mining income and the corresponding production cost for tax purposes.

To calculate the operational mining net income (OMNI), expenses may be deducted according to the general corporate income tax regime.

The mining operating margin (MOM) is calculated as OMNI divided by OMGI and the additional progressive tax rate is calculated as follows: (MOM x 0.90 – 0.25) x 100.

If MOM exceeds 0.70, this value will be considered as the maximum for the progressive tax rate. Should the progressive tax rate calculation be negative, the rate will be considered null.

The additional tax will be calculated by applying the progressive tax rate to the OMNI.

Prior year tax losses arising as a result of mining operations and accrued after the effective date of this additional tax will be carried forward under the same conditions as for corporate income tax.

Finally, it is important to mention that transfer pricing regulations will also apply to this additional tax.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Uruguay), Montevideo
  • Martha Roca
    +598 2902 3147
  • Rodrigo Barrios
    +598 2902 3147

EYG no. CM3914