Regulations Governing the Taxation of Minerals and Mineral Products

November 7, 1980 REVENUE REGULATIONS NO. 13-80 SUBJECT : Regulations Governing the Taxation of Minerals and Mineral Products TO : All Internal Revenue Officers and Others Concerned SECTION 1 . Scope . Pursuant to the provisions of Sec. 326 in relation to Sec. 4 of the National Internal Revenue Code, these regulations are hereby promulgated to implement Batas Pambansa Blg. 84 which provides for the amended taxation of mineral products. SECTION 2 . Definitions of Terms . For purposes of these regulations, the following definitions of terms are hereby adopted: (a) " Minerals " shall mean all naturally occurring inorganic substances in solid, liquid, or any intermediate state. Soil which supports organic life, sand and gravel, geothermal energy and natural gas are included in this term. cd i (b) " Mineral products " shall mean things produced and prepared in a marketable state by simply treatment such as washing or drying, but without undergoing any chemical change or process of manufacturing, by the lessee, concessionaire or owner of mineral lands. (c) " Mineral lands " shall mean lands in which minerals exist in sufficient quantity and grade to justify the necessary expenditures in extracting and utilizing such minerals. (d) " Mineral concentrates " shall mean marketable concentrations of certain mineral commodities, such as copper, zinc, lead, pyrite, gold (in matte or slag form), chromite and others. They are derived, from otherwise non-marketable products of mining, by simple metallurgical treatment such as gravity concentration, floatation, chemical precipitation and other methods. (e) " Lessee " may include a leaseholder, claim owner or operator, quarry licensee or permittee. (f) " Quarry permit " shall mean the right to extract, remove and dispose of all quarry resources found on or underneath the surface of privately owned lands. (g) " Quarry license " shall mean the right to extract, remove and dispose of all quarry resources found on or underneath the surface of public lands. (h) " Quarry resources " shall mean any common stone or other common mineral substances as the Director of the Bureau of Mines may declare to be quarry resources such as, but not restricted to, marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate, provided they contain no metal or metals or other valuable minerals in economically workable quantities. Quarry resources shall include sand and gravel whether removed from river beds or quarried. (i) " Gross output " shall be interpreted as the actual market value of minerals or mineral products, or of bullion from each mine or mineral lands operated as a separate entity without any deduction from mining, milling, refining, (including all expenses incurred to prepare the said minerals or mineral products in a marketable state) as well as transporting, handling, marketing, or any other expenses, except as provided in Sec. 5 hereof. (j) " Precious stones and semi-precious stones " shall mean naturally occurring minerals, rocks and organic materials with special physical, chemical and optical properties that give the qualities of beauty, durability, portability, fashionability and rarity when cut/polished or in raw form which are altogether called gem stones. The precious stones are those harder than quartz or harder than 7 in the Moh's scale of hardness, such as diamond, ruby, sapphire, topaz and emerald. Those as hard as quartz or softer are semi-precious stones. SECTION 3 . Who are Liable to the Royalty Tax . All lessees, owners or operators of mines, licensee or permittee of quarry mines, whether natural or juridical persons, shall be liable to the payment of the royalty tax due on mineral and quarry resources removed. SECTION 4 . Kinds and Rates of Taxes Imposed . The following taxes shall be paid by the lessee, owner or operator of the mine except occupation fee which shall be paid by a locator, holder or occupant. (a) Occupation fee an annual occupation fee of ten pesos per hectare or fractional part thereof, until the lease covering the mining claim shall have been granted. (b) Rental . (1) On coal-bearing public lands, an annual rental of five pesos per hectare or fraction thereof for each and every year for the first ten years, and ten pesos per hectare or fraction thereof for each and every year thereafter during the life of the lease. cd i (2) On public lands bearing quarry resources, an annual rental of fifty pesos per hectare or fraction thereof for each and every year during the life of the lease. (3) On all other mineral lands containing metallic and non-metallic minerals under existing mining laws or decrees, ten pesos per hectare or fraction thereof for each and every year during the life of the lease. (c) Royalties . (1) On coal, such royalty tax as may be specified in the lease, which shall not be less than twenty centavos per ton or one thousand and sixteen kilogram . cd i (2) On all non-metallic minerals and quarry resources, a royalty tax of three per centum (3%) of the actual market value of the gross output thereof at the time of removal. (3) On all metallic minerals, a royalty tax of five per centum (5%) of the actual market value of the gross output thereof at the time of removal. (d) Percentage tax for every original domestic sale, barter, exchange or transfer (1) Gold, silver and other precious metals of similar or greater value, precious and semi-precious stone fifty per centum (50%) of the gross selling price thereof, as provided in Sec. 195 of the Tax Code. (2) All other mineral, mineral products and quarry resources not included in (1) above, except cement ten per centum (10%) of the gross selling price thereof, as provided in Sec. 194 of the Tax Code. (3) Cement five per centum (5%) of the gross selling price thereof, as provided in Sec. 201 of the Tax Code. SECTION 5 . Computation of Tax Base for Royalty Tax Purposes . Generally, the taxes herein imposed are based on the actual market value of the gross output of minerals, mineral products or quarry resources at the time of removal without the benefit of any deduction for mining, milling, refining, transporting, handling, marketing or any other expenses, except as stated hereinbelow: cd (1) If the minerals or mineral products are sold or consigned abroad by the lessee, owner or operator of the mine under C.I.F. terms, the actual cost of ocean freight and insurance shall be allowed as deductions from the actual market value of the mineral shipped to arrive at the tax base. (2) In the case of mineral concentrates not traded in commodity exchanges in the Philippines or abroad such as copper concentrate, the actual market value shall be the world price quotations of the refined mineral product content thereof prevailing in the said commodity exchanges, after deducting the smelting, refining and other charges incurred in the process of converting the mineral concentrates into refined metal or mineral traded in those commodity exchanges. These deductions shall be in addition to those allowed in the preceding sub-Sec. if the mineral concentrates are sold or consigned abroad by the lessee, owner or operator of the mine under C.I.F. terms. (3) In the case of bullion (sold, silver, and other precious metals sold to the Central Bank of the Philippines), refining and other similar charges of the Central Bank of the Philippines shall be deducted to arrive at the tax base. SECTION 6 . Time and place of payment . The taxes herein imposed shall be paid to the revenue district officer, collection agent or the treasurer of the city or municipality of the place where the mine is located where no collection agent is assigned or, in the case of royalty tax payments, where the head office is located, and shall be paid upon filing of the required returns within the period prescribed hereunder: (a) Occupation fee The occupation fee shall be paid upon registration of the mining claim and on the same date every year thereafter. (b) Rental The rental shall be paid in advance on the date of the granting of the lease and on the same date every year thereafter during the life of the lease. (c) Royalties The royalty taxes shall be due and payable upon the removal of the minerals or mineral products or quarry resources except as provided in Sec. 7 hereof. (d) Percentage tax The percentage tax on sale of mineral, mineral products and quarry resources shall be paid within twenty days after the end of each quarter. SECTION 7 . Manner of Payment of Royalty Tax and Filing of Returns . (a) Upon removal The royalty taxes herein imposed shall be paid at the time of removal. For this purpose, before removing any minerals or mineral products or quarry resources subject to the royalty tax, the lessee shall file in duplicate a return (BIR Form No. _____) setting forth among others, the quantity and the actual market value of the minerals or mineral products or quarry resources to be removed and pay the royalty taxes due thereon in accordance with the provision of Sec. 6 hereof. The lessee, owner or operator of mines must prepare such return in such manner that the mineral products to be listed in such return should approximate what could be ordinarily loaded in one vehicle commonly used in transporting said products from the place where the mine is located to the point of destination. In all cases, all shipments of mine and quarry products shall be accompanied by a copy of the return filed together with a copy of the revenue tax receipt or copy of the letter of approval of the bond duly certified by the corporate treasurer or any duly designated corporate official. (b) Monthly return Where the prepayment of royalty taxes at the point of removal would result in undue financial hardship to the lessee, owner or operator of mines, minerals or mineral products or quarry resources may be removed without prepayment, conditioned upon filing of a bond by the lessee, owner or operator of the mine, in the form, amount and in accordance with such sureties as the Commissioner may require, in which case the royalty taxes shall be paid by filing a return (BIR Form No.) covering all shipments made during each month from the storage point of the mine and pay the taxes due thereon within twenty days after the close of the month of shipment. (c) Quarterly returns Within twenty days after the end of each quarter, all lessees, owners or operators of mines are required to make a return (BIR Form No. _____) in duplicate, setting forth the quantity and the actual market value of the minerals or mineral products or quarry resources removed during each calendar quarter and pay the royalty taxes due thereon, if any. In determining the quantity and the actual market value of the mineral products for the quarter for purposes of ascertaining the correct royalty taxes due thereon, any and all adjustments arising from price or quantity fluctuations as evidenced by the smelter's final outturn report received during the same quarter shall be considered. SECTION 8 . Filing of Bond . The amount of bond which shall be filed by a lessee, owner or operator or miner pursuant to and under the condition set forth in the preceding Sec. shall be equal to the total royalty taxes paid during the preceding six (6) months' period provided that the minimum amount shall not be less than ten thousand pesos. The bond shall be filed with and approved by the Commissioner of Internal Revenue or the regional director which has jurisdiction of the place where the mine is located. casia Copies of the letter of approval of the bond must be furnished the collection agent or the treasurer of the city or municipality where no collection agent is assigned at the points of removal, revenue district officers and the corresponding revenue regional directors who have jurisdiction of the municipality where the mineral products were removed. If the bond is approved by the regional director concerned, the copy of the letter of approval of the bond must likewise be furnished the Commissioner, Attention: The Chief, Agriculture and Natural Resources Division, BIR, Diliman, Quezon City. SECTION 9 . Abolition of other Charges and Fees . All other charges and fees directly imposed on minerals, mineral products and quarry resources under existing general or special laws, are hereby abolished. SECTION 10 . Disposition of Rentals Collected . The rentals prescribed under Sec. 6 hereof shall be shared by the municipalities or cities where the mining claims are located in the following manner: (a) Thirty (30%) per centum to the province; and (b) Seventy (70%) per centum to the municipality. However, in the event the mining claims are located in chartered city, the full amount shall entirely accrue to that city. SECTION 11 . Penalties . (a) General penalties . If the royalty taxes are not paid within the period prescribed above, there shall be added thereto a surcharge of twenty-five per centum, the increment to be a part of the tax and the entire unpaid amount shall be subject to interest at the rate of twenty per centum per annum. Where a false or fraudulent return is made, there shall be added to the royalty taxes a surcharge of fifty per centum of their amount, and the entire unpaid amount shall be subject to interest at the rate of twenty per centum per annum. The amounts so added shall be collected in the same manner and as part of the royalty taxes. cd (b) Specific penalties . (i) Anyone liable to make a return of the actual market value of the output of mines or to pay the royalty taxes required in Sec. 6, who refuses or neglects to file such return, or to pay such royalty taxes at the time or times specified therein; and any lessee, owner, or person in charge of any minerals, mineral products and quarry resources upon which the royalty taxes, imposed in these regulations are applicable, who removes, in violation of these regulations, or who allows or procures the unlawful removal from the mines of any such products, upon which the royalty taxes have not been paid; and any person who abets or aids in the unlawful removal of minerals, mineral products or quarry resources shall be fined not more than five thousand pesos and imprisoned for not more than three years. (ii) Anyone required under the National Internal Revenue Code to make, render, or file a return of the actual value of the output of mines, who makes, renders, or files a false or fraudulent return with intent to defeat or evade the payment of the royalty taxes, as the case may be, shall be fined not more than ten thousand pesos and imprisoned for not more than five years. SECTION 12 . Records to be Maintained . Every lessee, owner or operator of mines shall maintain records as well as all supporting papers used in compiling the returns required to be filed under Sec. 7 hereof, which must be made readily available at its principal place of business. acd SECTION 13 . Repealing Clause . All acts, laws, decrees, executive orders, rules and regulations, or parts thereof, which are contrary to or inconsistent herewith, except those granting tax incentives, are hereby repealed, amended or modified accordingly. SECTION 14 . Effectivity . These regulations shall take effect immediately. The rates prescribed above shall take effect September 19, 1980, and as provided hereunder: (a) On metallic minerals, the old rate plus fifty per centum (50%) of the increase in rates prescribed therein, as shown below, until March 31, 1981: (i) on gold three and one-fourth per centum 3.25%); (ii) on all other metallic minerals three and one-half per centum (3.50%) . (b) On all non-metallic minerals and quarry resources, the old rate plus fifty per centum (50%) of the increase in rates prescribed therein until March 31, 1981. cd i (c) After March 31, 1981 the full rate of five per centum (5%) and three per centum (3%) shall be imposed on all metallic minerals and all non-metallic minerals and quarry resources, respectively. (SGD.) EFREN I. PLANA Acting Minister of Finance Recommended by: (SGD.) RUBEN B. ANCHETA Acting Commissioner