Duties, royalties and taxes
Duties, royalties and taxes payable by private parties
What duties, royalties and taxes are payable by private parties carrying on mining activities? Are these revenue-based or profit-based?
The Mining Code (Law No. 12 /2021 of 30 June) sets out a special tax regime for holders of mineral rights (without prejudice to the general tax regime that applies to any entity in East Timor, namely, corporate income tax).
Mining royalty
The rates applicable in connection with the mining royalty, which is calculated on the value of the mineral resources, are as follows:
- precious metals and minerals: 8 per cent, if unprocessed; 3.5 per cent, if processed;
- common metals: 7 per cent, if unprocessed; 2.5 per cent, if processed;
- gems: 8 per cent, if unprocessed; 3.5 per cent, if processed;
- radioactive minerals: 8 per cent;
- rare earth minerals: 15 per cent; and
- ornamental stones: US$10 per tonne, if unprocessed; US$1 per tonne if processed;
Surface fee
This fee, payable by all natural and legal persons carrying out mining activities, is levied on the concession area. The amount payable varies according to the size of the concession area, the type of mineral explored, the type of mining activity and the operation year in question and can range from US$25 to US$400 per square kilometres.
Tax advantages and incentives
What tax advantages, tax credits and incentives are available to private parties carrying on exploration and mining activities?
The tax regime applicable to private parties carrying on mining activities is set out in the Mining Code, in the Tax Law and Law No. 15/2017 of 24 August, which establishes the legal regime on private investment (the Private Investment Law). The Private Investment Law foresees the possibility of celebration of a special investment agreement between investors and the Timorese state, under which tax advantages and incentives may be granted to the investor.
Tax stabilisation
Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?
There are currently no tax stabilisation agreements nor tax stabilisation legislation in place in relation to the mining sector.
Carried interest
Is the government entitled to a carried interest, or a free carried interest in mining projects?
There are no express provisions in the Mining Code establishing a free carried interest to the benefit of the Timorese state in mining projects. State participation is subject to the Council of Ministers’ decision that defines the terms and conditions of such participation.
Transfer taxes and capital gains
Are there any transfer taxes or capital gains imposed regarding the transfer of licences?
There are no specific transfer taxes or capital gains imposed regarding the transfer of licences. Any transfer of mineral rights shall, nevertheless, be considered for corporate income tax purposes.
Distinction between domestic parties and foreign parties
Is there any distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign parties?
No. There is no distinction between duties, royalties and taxes payable by domestic parties and foreign parties.