Amendment to the implementing regulations of the Mining Investments Law

On May 9, 2003, Decree No 1089/03 was published in the Official Gazette, which modifies the existing implementing regulations of the Mining Investment Law No 24,196 (the “Law”), which had been approved by Decree No 2686/93.

The reasons for the enactment of new implementing regulations were, at first, the need of adapting the implementing scheme then in force to the Law, because the Law had been amended by Law No 25,429 in May 2001, but not the implementing regulations. In addition, it was considered necessary to adapt the implementing scheme and incorporate certain additional matters, taking into consideration the experience gathered from the last nine years in which the prior regulations had been applied.

The amendments incorporated by Decree No 1089/03 are very exhaustive and comprise mainly the following areas:

1. Activities covered by the Law

Certain activities are incorporated within the scope of the Law, such as facilities for the processing of minerals and the treatment of minerals of foreign origin performed in local facilities, subject to certain conditions.

2. Taxes included and excluded from the fiscal stability

Direct taxes are included in the fiscal stability benefit granted by the Law. “Direct Taxes” mean such taxes in which the payment obligation is in charge of the mining company, which has not legal grounds to be reimbursed.

Indirect taxes are excluded from the fiscal stability. “Indirect Taxes” mean such taxes in which the taxpayer is able to obtain from a third party a reimbursement of the amount of the tax which is due.

3. Income Tax

Mining companies registered under the Law are able to deduct for income tax purposes all expenses arising from the initial investigation stage to the feasibility study of the mining project.

Expenses incurred prior to the date of registration under the Law are not deductible.

In the event of new projects or expansions of existing mining projects, the deduction might be performed for a maximum term of five years, as from the date of commencement of the production process.

4. Amortization of goods affected to the mining activity

The amortization regime provided under the Law is applicable to both imported and national goods, which might be new or used products.

Such goods which are to be amortized must remain in the patrimony of the beneficiary for its entire lifetime or until the end of the production process and they must be used in the mining activities.

5. Import duties

Companies registered under the Law are exempted from the payment of import duties, including the “Statistics Duty” (“tasa de estadística”). This exemption applies to new or used goods as well.

Companies which render services to the mining industry (i.e., drilling, transportation companies, etc.) are also beneficiaries of the above exemption, provided that the mining activity represents certain percentage of its total revenues, as established from time to time by the authorities.

6. Fiscal stability: definition of “total tax burden”

The Law provides that registered companies shall not suffer an increase in the so-called “total tax burden”, as a result of an increase of taxes or duties at a federal, provincial or municipal levels, for a term of 30 years as from the date of filing under the Law.

Decree No 1089/03 includes an annex which provides a detailed mechanism to calculate variations of such “total tax burden”.

The enactment of Decree No 1089/03 had been awaited by the mining industry for a long time, and thus it is expected that its enforcement will solve certain situations of uncertainty or lack of legislation arising from the former regulation, which will in turn benefit the mining activity in Argentina.