Mongolia Alert - New Mineral Royalty Regime: A Two-Tier Royalty Rate
31 JANUARY 2011
On November 25, 2010, the parliament of Mongolia, the State Great Khural, adopted an amendment to Article 47 of the Minerals Law of Mongolia. The amendment introduces a new surtax royalty that is applicable from January 1, 2011.
The key features of the amendment are:
A surtax royalty is imposed on the total sales value of 23 types of minerals in addition to the standard flat-rate royalty previously applicable;
The new surtax royalty replaces a previously applicable windfall profits tax;
The rates of the surtax royalty vary depending on the type of minerals, their market prices and their degree of processing. More specifically, the rates are significantly higher for copper than for other types of minerals; the rates increase as the market prices for the minerals go up; and the rates are lower for processed materials than for unprocessed minerals (in order to encourage mining companies to engage in value-added activities).
On the other hand, the amendment to Article 47 of the Minerals Law leaves some question unanswered, which are expected to be dealt with in future implementing guidelines.
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