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Part C: Fiscal Terms - 36. Fiscal Terms - 36.3 Taxes | 36.3(c). Customs Duties

Customs duties are a tax or levy imposed on imported (and sometimes exported) goods, usually calculated as a percentage of the value of the goods. These duties enable a country to protect its domestic industries, and economy, by controlling the flow of goods into and out of the country.

Rules and procedures for custom duties on imports of mining companies should follow the general customs legislation. However, given the capital intensive nature of mining activities, and the very specialized equipment that is needed and often not available within the host country, most countries grant some form of exemptions on certain imports, during the exploration and construction phase, and sometimes during the exploitation phase. Countries should ensure that such duties exemptions only apply to goods that are not available in country and apply without discrimination across all mining companies, foreign and local. Countries should be careful of exemptions discriminating against the local companies who may not benefit from customs exemptions.

An informed discussion between the regulating entity, the customs authority and the mining industry is advisable to design an adequate regime for imports of mining companies.

As a word of caution, it is advised to record and rigorously audit all imports from mining companies, even if they are exempt from custom duties, as these imports will constitute deductible costs against future profits.

36.3(c). Example 1:

Article [_]

All materials, machinery and equipment referred to in the present Act, which has been imported by a prospecting or operating licence holder, or their authorised subcontractors, and which may be re-exported or sold after use, shall benefit from the temporary admission regime, with statistical fees to be paid (RSTA).

Article [_]

(1) During the implementation phase for the initial investments and the expansion of the production capacity of an existing mine, an operating licence holder shall be exempt from customs duties, including VAT, collected on imports of materials, components, machinery and equipment as well as spare parts included in the approved programme and intended to be used directly and definitively for mining operations.

(2) For the purposes of the exemption provided for in the present Article, the value of the parts may not exceed 30% of the overall value of the Cost, Insurance and Freight (CIF) for the imported machinery and equipment.

(3) A list of materials, components, machinery and equipment, as well as parts and spare parts, which may benefit from the exemption shall be annexed to the operating licence.

(4) Authorisation for temporary admission shall be given for utility vehicles which feature on the list mentioned above.

(5) The following components, materials and equipment may not give rise to the exemption on imports:

(a) vehicles used to transport people and merchandise other than extracted mining products;

(b) materials, components, machinery and equipment where it is possible to find an equivalent made in Côte d'Ivoire or which are available under the same conditions with regard to price, quality and guarantees, amongst others, as those of the same goods of foreign origin;

(c) household furniture or other household effects;

(d) goods which are not eligible for deductions, in application of the provisions of [the General Tax Code].

(6) An operating licence holder shall retain the right to sell their imported materials, components, machinery and equipment in Côte d'Ivoire, provided that they pay the duties and taxes which are applicable on the date of the transaction, on the value of the sale, and comply with the formalities prescribed in the regulations which are in force.

(7) The period during which the holder may benefit from exemptions on imports may not exceed the deadline provided for in the decree allocating the operating licence, for carrying out the work relating to the initial investments, and two (2) years for investments relating to the expansion of production capacity. These time limits may be extended under the terms laid down by decree.

Annotation

Drawn from Cote d’Ivoire’s Mining Code (2014), this provision offers one way to facilitate import of the required sophisticated equipment that is only needed during the development phase, allowing for a special “temporary admission regime.” Such specified equipment that is needed temporarily and will be exported later can be imported free of duties.

However, if the company sells the equipment in Cote d’Ivoire rather than exporting it, it should be subject to customs duties as well as VAT on its import value so as not to distort competition among importers.

It should be noted that the law provides for a pre-approved list of the materials and equipment that benefit from the exemption, which shall be attached to the exploitation permit, which can be used as a means to prevent abuse of exemptions. However, given the long duration of mining projects and the possibility for changes to inputs needed or changes to availability of inputs in country, it may be necessary to review this list periodically (for example, every [X] years).

The provision highlights the goal of the application of customs duties: materials and equipment which can be found in Cote d’Ivoire at comparable price and quality do not benefit from the duties exemption.

36.3(c). Example 2:

Article [_]

Any holder of a mining title or permit who has imported equipment exempt from customs duties and taxes and who wishes to reassign them to the State or to a third party shall be required to request authorisation in advance from the Customs Department (Administration des douanes) to put said equipment on the market, failing which, they shall be penalised for not complying with the regulations which are in force.

Article [_]: Customs and tax benefits during the prospecting phase

Materials, raw materials, and materials intended for prospecting activities, and which must be imported in order to carry out the prospecting programme, shall be subject to the payment of:

(a) Category I customs duties under the Customs Tariff, at a rate of 5%;

(b) statistical fees at a rate of 1%;

(c) a community solidarity levy at a rate of 1%;

(d) a community levy at a rate of 0.5%;

(e) any other community levy.

The taxation on imports also extends to parts and spare parts for machinery and equipment. In any event, the value of the parts and spare parts may not exceed 30% of the overall value of the Cost, Insurance and Freight (CIF) for the imported machinery and equipment.

The taxation on imports extends to lubricants and fuel supplying the fixed installations, drilling materials, machinery and other equipment intended for prospecting activities.

Article [_]

A list of items which may benefit from the tax regime indicated above shall be established by a joint decree from the Ministers for Mining and Finance, respectively. When a prospecting licence is issued, this list shall be attached and shall form an integral part thereof. If certain items which must subsequently be imported do not feature on said list, a list of added items may be drawn up by the Ministers for Mining and Finance.

Article [_]

(1) Materials used for prospecting, imported professional equipment, special purpose or work site vehicles, excluding private vehicles, as well as machinery, shall benefit from the temporary admission regime for the duration of the prospecting phase.

(2) Prospecting licence holders shall be required to provide the Customs Department with a statement of materials admitted under the temporary admission regime, within the first quarter of each year.

Article [_]

Materials, components and equipment, where it is possible to find an equivalent made in Burkina Faso and which are available under purchasing conditions which are at least equal to those for goods to be imported, as well as vehicles used or imported solely for personal or family purposes may not benefit from the tax regime indicated above.

Article [_]

Geo-services companies offering services related to prospecting and operating activities, and which work exclusively for mining companies, shall benefit from the tax regime provided for in Article 149 above, insofar as they act as subcontractors for a holder.

Article [_]: Customs and tax benefits during the period for preparatory work

(1) During the period of preparatory work for mining operations, which shall not exceed three years, industrial operating licence holders shall be exempt from customs duties when importing materials, raw materials, components, fuel and lubricants intended to produce energy and for the functioning of special-purpose or work site vehicles, excluding private vehicles, and equipment relating to said work, and also their related parts and spare parts, excluding:

(a) statistical fees at a rate of 1%;

(b) ta community solidarity levy at a rate of 1%;

(c) a community levy at a rate of 0.5%;

(d) any other community levy.

(2) They shall also benefit from the temporary admission regime for equipment and materials imported for the purposes of carrying out said preparatory work.

Article [_]

(1) A list of materials, components, machinery and equipment, as well as parts and spare parts, which may benefit from the customs exemption shall be annexed to the operating licence and shall be an integral part thereof.

(2) Materials, components, machinery and equipment which were used in the prospecting phase and which are to be used in the operations phase, shall be included in the list of equipment for the operations.

Article [_]

(1) The time period for the exemptions provided for in Articles 154 and 155 above must not exceed two years for mines.

(2) However, a single extension of one year from the date on which the exemption period expires may be granted by order of the Minister for Mining, where the level of investment which has been made is at least 50% of the planned investment. In all circumstances, these exemptions shall end on the day of the first commercial production.The end of the period for preparatory work shall be noted in a joint order from the Ministers for Mining and Finance.

Article [_]

(1) The benefits provided for in Article 155 shall extend to the subcontractors of an operating company, which work exclusively for mining companies, provided that they present the Customs Department with a contract which has been duly registered and concluded as part of the preparatory work.

(2) This contract shall be subject to the formality of registration at the rate provided for for legal instruments not regulated by legislation.

Article [_]

In the event that the goods or equipment which benefited from the customs exemption regime or the temporary admission regime are assigned or sold, customs duties and taxes shall be collected in accordance with the regulations in force at the time of the sale.

Article [_]: Customs and tax benefits during the operations phase

In the operations phase, from the date of the first commercial production, when any holder of an industrial operating licence imports materials, raw materials, fuel and lubricants intended to produce energy and for the functioning of special-purpose or work site vehicles, excluding private vehicles, and equipment, they are to pay the Category I duties and taxes under the Customs Tariff, including:

(a) customs duties at a rate of 5%;

(b) statistical fees at a rate of 1%;

(c) a community solidarity levy at a rate of 1%;

(d) a community levy at a rate of 0.5%;

Article [_]

(1) Holders of operating licences for semi-mechanised operations shall benefit from the tax regime provided for in the above Article for the entire operating life of the mine.

(2) Companies which hold operating licences relating to quarry materials, excluding artisanal operators, shall benefit from this tax system solely for the equipment required for production and for the first batch of spare parts which comes with said equipment. The list of materials, components and equipment which may benefit from this tax system shall be annexed to the licence and shall form and integral part thereof.

Article [_]

(1) Notwithstanding the special arrangements provided for in Article [_] of this [Code][Act][Law], the holder of an operating licence relating to mining materials may benefit from the temporary admission regime.

(2) In the event of the assignment or resale of an item under the temporary admission regime, mining title or permit holders in the operations phase shall become liable for all duties and taxes as at the date of assignment or resale.

Article [_]

(1) The customs benefits provided for in the operations phase shall extend to the operating company's subcontractors, working exclusively as part of the mining of mineral substances and who have contracts duly registered with the Tax Administration.

(2) This contract shall be subject to the formality of registration at the rate provided for for legal instruments not regulated by legislation.

Annotation

Drawn from Burkina Faso’s mining code (2015), these provisions are similar to those provided under the law of Cote d’Ivoire. These provisions provide more detail on the formulation of the duties exempt list, which requires a joint order of the minister of finance and minister of mines.

Note that the only period of total exemption of import duties for materials and equipment is the development phase, during which a majority of the heavy and specialized equipment would be imported for construction of the mine. This period of exemption must end no later than the start of commercial production. Imports during the exploration and exploitation phase are subject to a single rate, except that imports of materials and equipment during the exploitation phase that are “temporarily admitted” and will be later exported are also exempt from duties.

As under Cote d’Ivoire’s mining code, if such temporarily admitted materials or equipment are transferred within the country, duties must then be paid.