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On October 30th, 2013, Mexican Congress approved the tax reform proposal presented in early September by Mexico's President, Enrique Piña Nieto. The most significant changes which relate directly to the mining industry are:
1. A new mining royalty fee of 7,5% on operating profits derived from the revenues from the extractive activities and sales from extraction activities and sales and certain deductions. The tax will be applied on EBITDA. The revenues and expenses to be included in the calculation will be the ones included in the new Income Tax Law, with the exception of interests, annual inflation adjustment and certain other items for revenues; and tax depreciation, interests and annual inflation adjustment and taxes paid on the regular activity for expenses. The payment of this duty must be remitted no later than the last business day of March of the following year.
2. An additional mining fee of 0,5% on the gross revenues of gold, silver and platinum mines. The rate will be applied on sales without any deductions. It is important to notice that the compliance with this Extraordinary Mining Duty is independent from other mining duties and the payment should be done no later than the last business day of March of the following fiscal year.
Following senate approval, the reforms only need to be enacted by the President to become law. The introduced changes have a significant impact on mining companies doing business in Mexico.
For more information regarding already enacted as well as potential tax reforms and their implications, please contact a member of Manning Elliott's Latin America Specialty group for further assistance.