Marcos signs into law new mining tax system

Miners laud more consistent rules

MANILA, Philippines —  President Marcos yesterday signed into law a measure that seeks to simplify the country’s mining fiscal regime and ensure a fairer government share from natural resources, a move seen to promote a fairer and more transparent mining tax system while protecting the environment.

A priority measure of the administration, Republic Act 12253 or the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act establishes a simplified and uniform fiscal framework for the mining sector and enhances environmental safeguards.

It also aims to provide fiscal predictability and stability for investors through clear tax guidelines, provide incentives to long-term investments and improve the mining sector’s competitiveness.

“With the signing of the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act, we are putting into place a system that is fairer, that is clearer and more responsive to the needs of both our people and the environment,” Marcos said during the signing ceremony for the law at Malacañang.

“With this law, we send a very clear and powerful message: progress shall never come at the cost of our people, nor our planet. Minerals are finite. Once extracted, they are gone forever. But if we use them wisely – tax them fairly, protect our environment as we mine, and ensure that revenues return to the people – then their value will outlive all of us,” he added.

The mining sector welcomed the newly signed fiscal regime despite the imposition of higher taxes, saying the reform offers stability as the Philippines seeks a bigger role in the global market for critical minerals.

The Chamber of Mines of the Philippines (COMP) said higher taxation was “inevitable,” but emphasized that what matters most to investors is the consistency of the rules.

“The new tax regime aligns the Philippines with global mining jurisdictions, making us more competitive and attractive to investors, especially at a time when the demand for critical minerals is increasing worldwide,” COMP president Michael Toledo said in a statement.

The law provides the government higher revenue from the country’s mineral resources by introducing a five-tier, margin-based royalty at rates ranging from one to five percent on income from metallic mining operations outside mineral reservations and a minimum royalty rate of 0.1 percent on gross output for mines below the margin threshold.

It also imposes a five-tier, margin-based windfall profits tax at rates ranging from one to 10 percent on income from metallic mining operations and implements a 2:1 debt-to-equity ratio or a thin capitalization rule applicable to related-party debt, to limit the amount of tax-deductible borrowing costs arising from the debt.

The estimated revenue from the mining fiscal regime is at P25.08 billion from 2026 to 2029 or an annual average of P6.26 billion.

The measure likewise adopts a ring-fencing rule on a per-project basis to prevent the consolidation of mining project income and expenses by the same taxpayer. The feature prevents companies from offsetting losses from more profitable mining projects.

“When collecting taxes, each mining contractor is recognized as a separate taxable entity. This prevents the consolidation of income and expenses of all mining projects by the same taxpayer,” Marcos said.

“Gone are the days when a mining contractor (could) bury its profits beneath the weight of losses. No longer can we use the one project’s failure to conceal another project’s success,” he added.

The law also clarifies that the applicable local business tax rate on mining contractors is 0.5 percent and keeps the imposition of the five percent royalty for mines inside mineral reservations; 25 percent corporate income tax; four percent excise tax; one percent minimum indigenous people royalty and applicable withholding taxes, among other taxes.

To uphold transparency and accountability, the law institutes mechanisms for the monitoring and auditing of mineral sales and exports, public disclosure of mining data and the establishment of a multi-stakeholder accountability group. The mechanisms aim to lessen revenue leakages, maximize collections and boost sector governance while protecting the environment and communities through natural capital accounting data in accordance with the Philippine Ecosystem and Natural Capital Accounting System.

“Transparency is now the rule, accountability our standard, and fairness the measure by which we move forward,” Marcos said.

“In light of this, the Bureau of Internal Revenue (BIR) and the Bureau of Customs will examine and audit all sales and exports of minerals and inspect mining company records, in coordination with the Mines and Geosciences Bureau.”

The disbursement of local governments’ shares from mining taxes will also be streamlined to address delays. The law also allocates 10 percent of mining royalty from inside mineral reservations to the exploration efforts of the MGB, establishment of mineral valuation laboratories and facilities by the Metals Industry Research and Development Center and the acquisition of BIR tools.

“This is done to guarantee that part of the revenues is reinvested in exploration, in research, above all, environmental protection and sustainable practices,” the President said.

On top of the allotted national revenue collections, local governments will also be given 40 percent of the gross collections from excise taxes on mineral products, royalties and other taxes or fees.

“This ensures that the communities who bear the brunt of mines will also experience their benefits,” the President said.

Special Assistant to the President for Investment and Economic Affairs Frederick Go said the new law would create jobs, increase government revenues for essential services and attract responsible investors.

“This marks a significant milestone in promoting the Philippine mining sector as a  key player in the global chain,” Go said in a statement.

COMP commended Congress and the Department of Finance (DOF) for their “pragmatic” and consultative approach, and credited President Marcos for what it called leadership in pushing through the long-overdue reform.

The group noted that the timing of the policy shift is crucial as the Philippines, home to abundant nickel and copper reserves, seeks to position itself as a reliable supplier for the global clean energy transition.

Despite its modest share in the economy, the mining sector continues to contribute meaningfully.

In 2023, the industry’s gross value added in mining reached P170.3 billion, accounting for about 0.70 percent of the country’s gross domestic, according to the MGB’s quarterly statistics.

Also, mineral exports comprised approximately 9.62 percent of total exports, and the sector generated taxes, fees and royalties totaling P48.8 billion for the year.  – Alden Monzon