MINING INVESTMENTS IN ARGENTINE

• Jurisdiction: Derecho Internacional

MINING LAW & INVESTMENT IN LATIN AMERICA
(April 2003)
CHAPTER 7C
MINING INVESTMENTS IN ARGENTINE

1) Different levels of taxation in the Argentine system

In Argentina there are three levels of government, 1) national, 2) provincial and 3) local. As a result, there are different levels of taxation.

Each of these levels of government exerts fiscal power in accordance with the National Constitution.

a) National Government

1. The National Government, with an exclusive nature and on permanent bases, exerts fiscal power on imports, exports and imposes postal tariffs

2. Together with the provinces and, on permanent bases, the National Government imposes indirect taxes on consumption (V.A.T.)

3. On temporary bases, the Government imposes indirect taxes (Income Tax, Presumed Minimum Income Tax).

b) Provincial Government

1. The provincial Government exerts, with an exclusive nature and on permanent bases, direct taxes (Real Estate, Stamp Tax, and Cards Tax).

2. Together with the nation and, on a permanent bases, indirect taxes (Gross Income Tax).

The provinces can levy taxes on everything within their jurisdiction, but they can not go against the principles established in the Civil, Commercial, Criminal and Mining Codes which fall within the national jurisdiction.

c) Local Government

They can levy taxes on things and activities performed within their jurisdiction (Taxes, Contributions or Rights).

2) Law 24.196 of Mining Investments

The National Congress approved the Mining Investments Law 24,196 (MIL) on March 17, 1993. The MIL represents a major change in the country's attitude towards the mining activity.

The ultimate goal behind the creation of this law was to grant the security framework imperative when dealing with the substantial investments the mining activity requires. The MIL is a promotional law based on tax incentives. The tax incentives established by the MIL are basically aimed at:

i. Creating a stable business environment for mining activities,

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ii. Alleviating the tax impact in the initial development stages, and

iii. Promoting the import of mining machinery and equipment.

Section 270 of the Argentine Mining Code (AMC) establishes that no contributions other than the annual mining fee shall be levied on mining properties, mining output and industrial plants, machinery and vehicles devoted to mining exploitation during the five years following the registration. Such tax exemption applies to national, provincial and municipal taxes existing or to be created levied on the exploitation or marketing of mining products, except for provincial stamp taxes.

2.1 The MIL and its scope.

Local and foreign companies registered with any national or provincial public registry of commerce wishing to benefit from the MIL regime must register themselves with the Secretariat of Mining (SM), which is the enforcement authority of the MIL.

Mining companies admitted to the MIL regime (the beneficiaries) must:

i. Submit a sworn statement indicating the activities and the studies to be carried out by them and describing the investments to be made according to a proposed timetable,

ii. File annual sworn statements describing the activities performed, attaching supporting documentation which shall be subject to the SM's scrutiny, and

iii. Disclose geological information related to the areas explored, which shall be added to the national mining data bank.

The activities promoted by the MIL are:

(a) Prospection, exploration, development, exploitation, extraction and processing of the minerals classified in the AMC,

(b) Crushing, grinding, exploitation, pelletization, sintering, briquetting, calcination, melting, refining, carving, primary manufacturing and polishing, to the extent such activities are accomplished by the same economic unit (which may include one or more processes) and are regionally integrated with the activities described (a) above.

Section 5 of the Decree 2,686/93 (the Decree) establishes that by-products of the processes listed above are also included within the MIL regime as well as products obtained through the processing of minerals.

Nuclear minerals, hydrocarbons, sands and stones used in the construction industry do not fall within the scope of the MIL regime.

2.2. Tax benefits granted by the MIL

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2.2.a. Fiscal Stability

The beneficiaries shall enjoy fiscal stability for a 30-year period, counted as from the date of...