4. Maximum potential tax burden
The bill incorporates a limit to the maximum taxation of mining royalty taxpayers (called the "maximum potential tax burden"), considering income tax, royalty, and final taxes (i.e., Global Complementary or Additional Tax) to which their owners will be subject upon profit distributions.
Specifically, it is established that when the sum of the First Category tax, mining royalty (both components), and the final tax that the owners would pay in case profits were fully distributed exceeds 46,5% of the operational profitability (as defined in section 3 i), above) then the royalty will be adjusted in such a way that it does not exceed said 46,5% (in case of mining exploiters with sales below the equivalent to 80,000 MTFC, the cap is lowered to 45,5%). For this purpose, the final tax of shareholders will consist of such figure resulting of applying a 35% on the company’s net taxable income, less the corporate income tax paid in the same exercise.
5. Provisional Monthly Payments
The bill introduces Provisional Monthly Payments (PPM) which taxpayers must make on account of the annual royalty to be filed and paid in April after the end of the respective commercial year.
PPMs are calculated as a percentage of the gross monthly income (perceived or accrued) of the taxpayer, derived from the sale of mining products. Said percentage will depend on the variation of the ratio between the royalty effectively paid the prior year and the PPMs made during such year (which may increase or decrease the PPM). Whenever the foregoing cannot be determined (because of a negative operating margin, absence of sales the prior year or other cause) the PPM is set to 0.3%. Moreover, the PPM rates are to be adjusted quarterly according to the variation of copper prices, under a methodology set forth by the bill.
6. Obligation to report financials
Mining exploiters shall also be bound to report their annual financial statements (both individual and consolidated) to the Chilean Financial Market Commission (the equivalent to the US SEC), which must be audited by a regulated auditing company and contain a note on the ownership of the mining entity. Quarterly financials must also be reported.
7. Transitory provisions
The Mining Royalty will enter into force as of January 1st, 2024. As a result, the current tax on the mining activity, set forth in the ITL, will be effectively repealed in that very date.