• Industry: Energy & Natural Resources
  • Type: Business and industry issue, Publication series
  • Date: 8/1/2013

Tax structuring: optimizing mining projects 

Early attention to tax can enhance forecasting and increase certainty over the tax burden.

Tax structuring is an integral part of the project planning process, with the crucial tax inputs being royalties, corporate income tax and depreciation write-off rates. ‘Resource nationalism’ is a growing concern, and owners can hedge against possible changes in tax and resource royalty rates, by agreeing fiscal stability agreements with tax authorities. Bilateral investment treaties protect investments by providing more certainty in relation to tax treatments and expropriation.

Get the right structures in place

Unincorporated joint ventures are popular holding structures, enabling partners to separately account for taxation, including writing off start-up losses against other projects. Large scale project structures can span multiple countries and equity parties, bringing transfer pricing to the fore. Owners will need to agree appropriate commodity values at the taxing point, to calculate resource royalty taxes. Advanced pricing agreements provide additional certainty.

Tax incentives add value to a project

Tax incentives and concessions enhance project returns and accelerate cash flow. Incentives may be agreed upfront at planning stage, or be acquired at a later stage to sweeten project outcomes. Key tax incentives include resource royalty holidays; lower corporate income tax; research and development (R&D) concessions and grants; accelerated tax depreciation write-off rates; and exemption from customs duty.

Employee taxes managed across the project

Large scale projects require a large work force. For local employees and visiting executives, employee taxes, visas and migration arrangements need to be carefully planned and managed over the project lifecycle to ensure consistent compliance with corporate policies and in-country regulations.

Covering every angle

KPMG member firms’ tax specialists deal with technical tax issues, and help clients work with governments and tax authorities, to keep abreast of emerging developments, agree taxation treatments and obtain greater certainty through advanced pricing agreements.


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