Provincial Tax on Mining Reserves in Crisis Due to a Supreme Court Judgment

In June 2013, the Province of Santa Cruz introduced a completely novel tax with the aim of increasing the tax burden on mining companies with activities within the province.

The tax is known as “Tax on Mining Real Estate Property” and involves an annual payment equivalent to 1% of the company’s mineral reserves’ value as of December 31 each year.

By implementing this tax, the Province of Santa Cruz has become involved in a “legislative adventure” and has turned its back on federal provisions and disregarded commitments undertaken by the province to promote mining activity and towards the aligning of federal and provincial tax laws.

When analyzing possible legal actions to obtain judicial protection of mining companies’ rights, the scenario is not encouraging as regards the violation of “fiscal stability”, as well as regarding the violation of provisions of Law No. 23,548, which regulates on the “federal co-participation tax regime”.

Fortunately, within the framework of the multiple irregularities found with this tax it was possible to file the case with the Argentine Supreme Court, providing the unconstitutionality claim with a structure appropriatee to the outlines of the Argentine Supreme Court’s original jurisdiction (judgments issued on November 11, 2014 in the “Oroplata S.A.”, “Minera Triton Argentina S.A.” and “Minera Santa Cruz S.A.”) cases.

The case now has a judicial ruling that goes beyond admitting the Court’s original jurisdiction.

Following a request submitted by Minera Triton Argentina, the Argentine Supreme Court has recently ordered the Province of Santa Cruz to refrain from claiming payment of the tax administratively or judicially and from seeking injunctive relief based on the Tax on Mining Real Estate Property.

In its ruling, the Court refers to the significance of the amounts at stake, and finds that the plausibility of the rights invoked by the company is verified.

This statement from the Court puts the controversial tax at a crossroads (judgment dated June 30, 2015, “Minera Triton Argentina S.A. v. Province of Santa Cruz, in re: preliminary injunction”).