OceanaGold asks CTA to suspend tax collection

MANILA, Philippines - Australian miner OceanaGold Corp. has asked the Court of Tax Appeals to temporarily suspend the imposition of excise tax on the company’s operations at the Didipio copper-gold mine in Nueva Vizacaya within the five year recovery period provided by the law.

In an interview on the sidelines of a Mining Luncheon held at the Manila Polo Club yesterday, OceanaGold country director for the Philippines Bradley Norman said the company is amenable to paying all the taxes demanded by the Philippine government, but wants clarification on the exemptions that are supposedly due to it under its Financial or Technical Assistance Agreement  (FFTAA) with the government.

“We have filed for a suspension order but we will continue to pay it (excise tax) until the area (for taxation) is finally determined,” said Norman.

OceanaGold is the first company to operate in the country under an FTAA. Under an FTAA contractors are allowed to recover their pre-operating expenses for a period of five years or until the date of actual recovery.

The Mining Act of 1995 stipulates that from the approval of the Declaration of Mining Project Feasibility up to the end of the recovery period, an FTAA contractor is exempt from corporate income tax, customs duties and fees on imported capital equipment, value-added tax on imported goods and services, withholding tax on interest payments on foreign loans and on dividends to foreign stockholders, and other national taxes, except excise tax on minerals.

After the recovery period, the contractor is required to pay all applicable taxes, fees, royalties and other related payments to the national and local governments.

The Bureau of Internal Revenue (BIR), however, issued last month a memorandum circular stating that FTAA holders must pay taxes to the government even within the recovery period.

“FTAA contractors are liable to pay the taxes due under the NIRC (National Internal Revenue Code) and existing rules and regulations during and after their “recovery period,” said BIR Commissioner Kim Henares in memorandum circular No. 17-2013 issued on Feb. 15.

The circular states that FTAA holders must income tax after the income tax holiday granted to them has lapsed.

OceanaGold holds an FTAA signed in 1994.

OceanaGold Philippines Inc. chairman Jose Leviste earlier said that a Bureau of Internal Revenue Ruling (BIR) in 2007 stated that the company is exempt from paying taxes during the recovery period.

The company in late February temporarily stopped the transport of concentrate from the mine. In early March, it resumed concentrate transport after paying excise tax “under protest.”