Income Tax: New Regulation on Deduction for Depletion of Mines, Quarries and Forests

Section 75 of the Income Tax Law (“ITL”) provides that when mines, quarries, forests and other similar goods exploitation implies the depletion of the substance that produces the income, the deduction in proportion to the substance depletion will be admitted, calculated according to the extracted units.

The ITL states that the tax value of mines, quarries, forests and similar goods will be given for the cost attributable to the referred goods plus costs incurred to obtain the concession.

For fiscal years beginning on January 1, 2018, third paragraph of section 75 (incorporated by means of Law 27,430) states that those costs aiming to satisfy technical and environmental requirements which are requested by applicable regulations determined by competent Enforcement Authority and for which mine owners and/or permit holders are responsible are  part of the abovementioned goods tax value.

The mentioned costs must be included from the moment that technical and environmental liabilities originated, regardless of the period when the expenses incurred.

For the purposes of costs originated by the fulfilment of technical and environmental regulations calculation, the first section after section 87 of ITL Regulatory Decree provides that mine owners and/or permit holders must present an annual report indicating the moment from which they are responsible for the fulfilment of rules and obligations.

This section also states that the referred costs will arise from financial statements and it authorizes the Argentine Tax Authority (the “AFIP” after its Spanish acronym) to regulate the conditions required for the information requested by the Enforcement Authority.

Through General Resolution N° 4518/2019, published in the Official Gazette on July 10, 2019, the AFIP determined the minimum information that the referred annual report from competent Enforcement Authority must contain:

• In respect of mine owners and/or permit holders, the annual report must detail: 1) name and surname or registered name; 2) taxpayer’s tax ID ( the “CUIT” after its Spanish acronym); 3) fiscal address.

 

• In respect of mines, quarries, forests and similar goods, the report must :

 

1. Detail the technical and environmental regulations applicable to mine owners and/or permit holders, and the date from which the responsible party is obliged to present said information.

 

2. Identify the territorial area granted as concession, and the territorial area actually exploited when applicable.

 

3. Include the estimated depletion in mine life years or removed units, as applicable.

 

4. Include the detail, value and, when applicable, the implementation date or the date of the incorporation to the property of: goods supplies and other costs that may have been added to the tax value, pointing out the deducted amounts on the income tax return of the annual report fiscal year (the respective financial statements items must be also identified).       

When the Enforcement Authority does not include the data requested in referred items 2, 3, and 4, the responsible party must submit a complementary report which includes the missing information, certified by an independent public accountant.

The annual report must state the business year which it refers to. 

Both the annual report issued by the Enforcement Authority and the complementary one must be available to the AFIP at the taxpayer’s address.

The General Resolution provisions are applicable for the fiscal years initiated as from January 1, 2018 (up to and including), and have been in force since July 10, 2019.