Clarification on taxes due from FTAA contractors during recovery periods

Under Section 81 of RA 7942 (otherwise known as the Philippine Mining Act of 1995), the collection of government share in financial or technical assistance agreement (FTAA) shall commence after the FTAA contractor has fully recovered its pre-operating expenses, exploration, and development expenditures.

The non-collection of the government share during the recovery period of the FTAA contractors referred to in Section 81 of RA 7942 is not tantamount to an express grant of tax exemption.

According to the BIR, even the pertinent provisions (Sections 83 and 24 on the liability of FTAA contractors to income tax and excise tax) of RA 7942 do not provide or mention any tax exemption to FTAA contractors.

Hence, FTAA contractors are liable to pay taxes due under the Tax Code and existing rules and regulations during and after their “recovery period”. This payment is in the nature of compliance with tax obligations and not in the nature of settling the “government share” under the FTAA.

(Revenue Memorandum Circular No. 17-2013, February 15, 2013)

Tax Brief – March 2013

Punongbayan and Araullo