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By: Euney Marie J. Mata-Perez on December 6, 2018

Senate Bill 1979 (in relation to House Bill 4800) proposes to impose a royalty tax on both metallic and non-metallic mining operations conducted outside mineral reservations, whether large scale or small scale, at three percent of the market value of the gross output of minerals or mineral products extracted or produced for the first three years from the effectivity of the law, four percenton the fourth year and five percent on the fifth year. It also proposes to impose an additional government share which will be due when the basic government share (on all collected taxes, royalties, fees and related payments from mining contractors) is less than 50 percent of the net mining revenue.

Thus, SB 1979 treats metallic and non-metallic mining alike, without distinction. However, metallic and non-metallic products, and the mining operations conducted to extract and/or produce them, are entirely different from each other as to the nature, use, importance and end-consumers of minerals produced.

Foremost, metallic and non-metallic minings involve two entirely different mining operations. Metallic mining, as the name connotes, involves the extraction of minerals that are composed of metals, such as iron ore, manganese, nickel gold, copper and silver. Non-metallic mining, on the other hand, involves the extraction of minerals that do not comprise of metals, such as basalt, phosphorous, limestone, shale and silica.

Mined raw metallic minerals would usually have to undergo further processing, like floatation (for copper) and beneficiation for gold which uses chemicals to separate precious minerals from waste ore for instance. The pits of metallic mines are generally drop-cut type which can go below sea level. Thus, they would create more wastes and cause more disturbance to the environment.

Mining of non-metallic minerals, on the other hand, is much simpler. Non-metallic minerals generally require no further processing, other than crushing or grinding, to make them useful. The raw material is generally the final product itself. Hillside cutting or “countour mining”, which is always above sea-level, is the usual pit type for non-metallic mines. Thus, non-metallic mining creates much less waste products and causes less disturbance to the environment.

At present, almost all of the metallic mineral products are exported and processed overseas. They are used for more high-end products, like jewelry.

On the other hand, almost all of the non-metallic mineral products are sold locally and are used in the manufacture or as components of various basic domestic products or commodities. Examples of these products are cement (which is highly composed of limestone, shale and silica), fertilizers (which uses limestone, phosphate and pozzolan) and soap (sulphur). Silica together with limestone is used for water filtration. Silica is also used for glasswares.

Cement and basalt are used to create concrete which play a big role in the infrastructure and construction projects of the government, as well as in the construction projects of private sectors and end-consumers. In fact, cement is considered a prime commodity. Basalt, another non-metallic mineral product, is used primarily for aggregate products (sand, gravel, etc.).

The imposition of additional tax burden to non-metallic mining operations and quarrying resources will be costly to the non-metallic industry. Republic Act No. 10963 (TRAIN 1) already increased the excise tax rate on all non-metallic minerals and quarry resources by 100 percent, i.e., from two percent to four percent. In addition, non-metallic mining companies are subject to a whole host of taxes from income tax, value added tax, local business taxes and various permit fees. Thus, an additional royalty tax would be the fourth internal revenue tax that non-metallic operators will be subject to.

Further, aside from the local and national taxes mandated to be paid, Republic Act No. 7942 (The Philippine Mining Act) requires mining companies to provide funds for social development and environmental protection in the areas where mining operations are present. Such companies are required to allot annually a minimum of one and a half percent of the operating costs to implement its Social Development and Management Program (SDMP).

The imposition of additional royalty tax and additional government share on non-metallic mining operations and quarrying resources will definitely result in higher prices of basic commodities such as cement and fertilizers. As a consequence, industries producing such commodities, like the cement industry, will suffer and lose its competitiveness in the regional and global market. It is a fact that imports of cheap cement products have been swamping the market.

There is clearly a huge difference between the minerals produced by metallic mining operations from those produced by non-metallic mining operations. Placing their products and operations in a single fiscal regime, without valid qualification or distinction, would be unfair to non-metallic mining permit holders whose mineral products are highly demanded for local use.

Also, imposing the same royalty tax on both metallic and non-metallic products would also violate some basic principles in taxation, such as the constitutional safeguard on equal protection of laws as well as the uniformity, equitability and progressivity of taxation.

Equal protection requires that all persons or things similarly situated should be treated alike. Our Supreme Court has acknowledged that if there is a valid and reasonable classification that makes real differences, one class may be treated and regulated differently from another.

Based on the above, we thus hope that our legislators will reconsider the imposition of an additional royalty tax on non-metallic mineral products.

Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer. She is the newly-elected President of the Asia-Oceana Tax Consultants’ Association.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at or visit MTF website at

From The Manila Times website on December 6, 2018

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Euney Marie J. Mata-Perez

Mark Anthony P. Tamayo

Gerardo Maximo V. Francisco