Argentina is one of the most interesting destinations in the world to consider for a mining investment decision (especially within certain Argentine provinces with pro-mining policies and culture).
Two thirds of the Andes mountain range can be found within Argentine territory and, as such, there are a vast quantity of mineral resources available with no need for exploration or exploitation.
There are several exploration projects that are very close to achieving feasibility. There is also a large number of prospects that have shown good results in exploration.
The price of Argentinean mining assets is low in comparison to similar assets located in other parts of the world. To add to this, Argentina’s democratic and federal constitutional system has continued in stability for more than 30 years, despite periods of political and economic crisis.
The mining legal regime is solid and stable, awarding strong rights to owners of mining concessions. Mining exploitation concessions have perpetual duration. Mining activity is considered to be of public use; its development has priority with respect to activities that may be developed in the same area, except public services.
There is also a promotional regime for the mining industry that grants a 30-year tax stability for new or amended mining projects that achieve certain feasibility or for new expansions on existing ones, among other benefits. All provinces have adhered to this regime.
In general, there are no conflicts with indigenous communities in areas where mineral resources are located; however, it should be noted that the importance of having an adequate and sufficient social license has been gradually increasing, which is further reflected in the legislation issued by some provinces in recent years.
In addition to general corporate, labour, regulatory and tax rules that are generally applicable to all industries in Argentina, the main legal rules regulating the mining industry arise from the following statutes:
Argentina is a Federal Country with a Federal Government, 23 provinces and an autonomous city. Each province has its respective Constitution and Government. The general rule under the National Constitution is that provinces shall retain all powers not vested upon the Federal Government.
The FMC regulates the rights, obligations and substantial procedures for the acquisition, exploration, exploitation and termination of mining rights and properties. The FMC is applicable all through the country and is enforced by provincial or federal authorities, depending on the jurisdiction (or federal territory) where the deposits are located.
Each province retains the power to regulate and enact local procedures, such as passing and thus further regulating the FMC locally at the provincial level. Moreover, provinces may have their own Provincial Mining Procedural Code (“Procedural Code”), which further regulates the FMC in each provincial territory.
According to the Argentine Constitution, provinces are the owners of natural resources located in their respective territories.
Generally, mining rights and concessions are granted to private parties who hold title to such rights and mining concessions, and explore, exploit and develop them. As an exception, state-owned companies may hold mining rights (reserved areas) but are bound to grant them to third private parties for exploitation.
See 1.5 Nature of Mineral Rights.
With respect to deposits located in provincial territories, each province is in charge of enforcing the FMC, the respective Procedural Code and all environmental legislation.
The enforcement of the FMC and environmental rules falls to the Federal Authorities only when deposits are located in a territory that is subject to federal jurisdiction. Federal Authorities are also involved where there is an interprovincial environmental impact or effect.
Most of the Argentine provinces have entrusted the enforcement of the FMC to different branches within their executive powers; only three provinces have entrusted such enforcement to the judicial branch (Salta, Catamarca and Jujuy).
Some provinces have decided to entrust the enforcement of environmental rules that apply to mining to the appointed Mining Authority, while others have entrusted it to the Provincial Environmental Authority (separate from the agency in charge of mining).
The Federal Government articulates the main national mining policies, and co-ordinates such policies with the provinces, but only retain concession powers in territories that are subject to federal jurisdiction.
The Federal Mining Secretary is the competent enforcement authority of the Mining Investments Law, which includes a promotional investment regime for mining, to which all of the Argentine Provinces have adhered.
Minerals are divided into three different categories, based on their importance and value and how they appear in nature. For minerals qualifying under the first and second categories, the underground mining rights and properties constitute a separate and different right from the surface land property. Accordingly, the mining right or concession holder may not be the same person as the one owning the surface land.
Each category has different rules for the acquisition of mining rights:
Mines of the first and second category of minerals are considered, by the FMC, to be real estate separate from the surface property above them. Minerals of both categories constitute underground property, subject to mining legal concession. They are granted to private third parties through a direct legal concession. Minerals subject to direct concession are granted through public bid only as an exception.
Third category minerals constitute the same property as the surface land and are not subject to concession but rather are directly owned by the owner of the surface land.
The owner of a mining concession owns all the minerals included in the first and second categories.
State-owned companies holding mining rights must grant them to private third parties for exploitation. In these cases, a bidding process is usually carried out in order to enter into an agreement between the private third party and the state-owned company. This agreement shall contain the terms and conditions for the private party to conduct specific activities (ie, exploration/exploitation activities), among other things.
Private persons can obtain the exclusive right to explore and exploit minerals via permits and concessions from the respective provincial mining authorities, under the applicable rules of the FMC. Exceptionally, exploration or exploitation rights may be obtained through contracts executed with state owned companies holding mining properties.
Exploration Permit or Cateo
Prior to conducting prospection and/or exploration activities, an exploration permit must be obtained. Moreover, as the environmental permit must be obtained in order to conduct the exploration works. Conducting exploration activities without an exploration permit may lead to serious problems, including loss of rights, conflicts with other miners, significant fines and criminal accusations.
A cateo is an exclusive exploration permit granted by the Mining Authority for a certain period, covering a specific area. During its validity term, the cateo gives the concessionaire the exclusive right to conduct exploration activities in the defined exploration area, and to declare discoveries. An important aspect of being able to perform exploration activities allowed under a permit is the ability to maintain the exploration permit in good standing.
The size of a cateo is measured in units of 500 hectares (has), which is the minimum size of a cateo; the maximum size is 20 units (10,000 has). No single person or entity (nor its agents) can hold more than 20 cateos or more than 400 units (200,000 has) per province.
A cateo of one unit has a duration of 150 days. For each additional unit, the overall duration is increased by 50 additional days. Cateos exceeding four units in size must be periodically reduced in size. Once 300 days have elapsed, 50% of the area in excess of four units must be relinquished. After 700 days, 50% of the remaining area in excess of four units must be relinquished. The application for relinquishment must show the co-ordinates of the area being kept by the applicant.
The steps to be taken to obtain a cateo can mainly be summarised as follows:
The cateo application filed with the Mining Authority gives the applicant priority over third parties claiming permits for the same areas.
The cateo permit does not allow the conducting of exploitation activities.
Exploitation Permit (Discovery Claims and Mining Concessions)
In order to be able to conduct mining exploitation activities, a Discovery Claim needs to be registered with the Mining Authority, which is the initial step in the process for acquiring and owning a mining concession. Such process has different stages and requirements. Nevertheless, the mining concessionaire has legal title to conduct exploitation activities from the registration of the discovery claim.
Irrespective of the legal title to conduct exploitation activities, such activities can only be legally deployed and conducted after obtaining the environmental approval for the exploitation stage.
The steps to be taken in order to obtain a mining concession may be summarised as follows:
Written applications (Discovery Claims) must be filed with the Mining Authority in order to obtain the mining concessions, and give the applicant priority over third parties claiming mining rights in the same area, if the applications concerned do not overlap with other mining rights previously granted or applied for.
The discoverer must submit a sample of the mineral discovered, jointly with the Discovery Claim. The discoverer must also indicate by Gauss Kruger co-ordinates an area not larger than twice the maximum size of the mining concession, within which the discoverer will perform the exploration works to confirm the discovery.
The area must be regular, except as affected by pre-existing claims or surface obstacles, and will remain unavailable to third parties until legal survey approval takes place.
First Category Mines are granted in the form of a concession to private individuals or companies in units called pertenencias. Under the FMC, the mining concession vests the concessionaire with a property title over the mine (including the right to explore and exploit in the concession area).
After confirmation from the Graphic Register Department that the area described in the application is not subject to previously submitted applications or registered mining rights, the Authority registers the Discovery Claim.
The registration of the Discovery Claim is published, and oppositions by third parties may be filed against it.
From the registration of the Discovery Claim, the mining concessionaire has 100 days in order to complete certain statutory works, under penalty of forfeiture of the registered mine.
Within 30 days of the lapsing of the 100-day term, the mining concessionaire needs to file with the Mining Authority a request for the granting of pertenencias and a request for the authority to conduct the survey of the area. Failure to meet this obligation in time results in the forfeiture of the mine.
The pertenencia is the unit of concession of a mine within whose limits the miner can carry out exploitation works. It consists of a solid body of rectangular or square base (unless the conditions of the land make such form impossible) and indefinite depth. The size and number of pertenencias a discoverer can apply for at the time the measurement and demarcation is requested depends on the type of mineral deposit discovered (lode ore or disseminated ore) and whether the discoverer is a company or an individual.
After the survey request, the survey is conducted and the requested units are granted according to law. Following the survey and pertenencias petition, the Mining Authority must issue a decision thereon. Both the petition and the resolution are published in the provincial Official Gazette. After that, if no third parties file an opposition, the survey and demarcation of the pertenencias is carried out. Finally, the Mining Authority registers it in the Registry Book, and a copy is given to the interested party as title to said mining property
Obligations Applicable to Mining Concessions
The mining concessions are, by law, granted in perpetuity (not subject to a validity term), under certain conditions and obligations. The violation of such conditions may lead to the forfeiture and revocation of the mining title.
The following obligations are mandatory in order to maintain the validity of the exploitation title in good standing:
The fulfilment of certain legally required works at the mine – minimum mine works, survey (mensura) and continuous works in order to avoid abandonment (“Statutory Works” and “Survey”)
Statutory Works must be performed within 100 days of the day following the discovery registration. Lack of performance of Statutory Works may result in the termination of the mining claim registration by the Mining Authority.
A Survey (including claim of pertenencias) must be requested within 30 days of the lapsing of the term for performing Statutory Works. Non-compliance with said obligation may cause the Mining Authority to arbitrarily locate the pertenencias, and in this case the rights of the discoverer are forfeited and the mine is registered as vacant.
Failure to evidence performance of Statutory Works or to file the claim of pertenencias and the Survey in due time may result in the forfeiture of the concession.
The payment of canones to the province (exploitation fees payable per mine and calculated on the type and amount of pertenencias of each mine during its life) (“canon”)
The canon is a fee charged on the mining concession, payable from three years after the date on which the mine is granted, on an annual basis. Law issued by National Congress fixes the annual canon per pertenencia. Generally, the annual canon is paid in advance in two equal instalments on June 30th and December 31st of every year.
The mining concession automatically lapses if the canon is not paid, at the latest, during the two months following the end of the year. The Mining Authority shall formally notify said circumstance to the applicant, and the latter is allowed to cure the lapsing of the concession by paying the canon plus fines within a 45-day term from the date on which the relevant resolution by the Mining Authority is notified to the applicant. If the applicant does not cure the situation in said 45-day term, the lapsing is then confirmed with no possible appeal, and the mine is registered as vacant, thus allowing any third party to apply for it.
“Canon” and “royalties” are two different obligations. The canon is a fixed fee paid per pertenencia to the local mining authority for owning mining concessions, while royalties are the mandatory mining royalties that should be paid to the province in connection with effective production (in addition to any contractual royalties that may exist in each particular case).
The submission and fulfilment of a plan containing minimum investment requirements (“Investment Plan”)
The FMC formally requires an Investment Plan to be submitted for each mining property within one year of the date on which the Survey is requested, regardless of whether or not said Survey is actually made. The FMC does not require a complete plan, but just a simple estimation of the plan and its disbursements. Such estimation, therefore, may only provide an approximate idea of the investments required.
The investments should be capital investments. Disbursements for wages and technical assistance expenses conducive to the workings and exploitation of the mine can be included.
The concession holder may, from time to time, introduce amendments to the investments estimated in the Investment Plan by rendering an account thereof to the Mining Authority, provided that the anticipated aggregate investment is not reduced through such amendments.
The Investment Plan cannot be less than 300 times the canon amount, and the estimated investments committed therein must be effectively made within five years of the date on which the Investment Plan is submitted.
In addition, in each of the first two years of the stipulated term, the amount of the investment should not be lower than 20% of the aggregate estimated amount at the time of submission of the Investment Plan. The foregoing tends to avoid concentrating the investments in the last year, following several years of inactivity. Upon an investment of 40%, the balance may be completed during the remaining term of the period.
Failure to timely submit the Investment Plan may result in the loss of the mine if its owner also does not submit the same within 30 days of the date on which the Mining Authority demands its submission.
Avoid abandonment of the Works and Mining Activity (identified hereunder as “Lack of Works”)
When the mine has been inactive for more than four years, the Mining Authority may demand filing of an activation or reactivation project, adjustable to the production capacity of the concession, the characteristics of the area, the available means of transport, the demand for products and the existence of farming equipment. A mine is deemed to have been inactive when no exploration, preparation or production tasks have been regularly conducted in it during the above-mentioned term. The demand shall be met within six months, under penalty that the concessionaire’s right may lapse. Once the project is filed, the concessionaire shall comply with each of its stages in the terms respectively provided for, which may not exceed five years taken together, under penalty that the concessionaire’s right may lapse, which penalty is applicable upon the first default.
Mining activity is considered by law to be of public utility and generally has priority over activities conducted on the surface land (with a few exceptions).
Mining exploitation concessions are granted in perpetuity, but may expire as a consequence of lack of fulfilment of certain work and investment obligations to be performed in order to keep title in good standing.
Assignment of mining rights and properties are not subject to prior approvals by the Government.
Oil and gas resources and third category minerals are not part of such ownership. Ownership thereof is subject to specific regulations. Also, there are specific rules to deal with overlapping situations.
In addition to the main mining-related permits referred to above, the development of mining projects requires all sorts of regulatory, environmental and sectorial permits for the construction and installation of the required infrastructure, which should be requested and are granted at the national, provincial and municipal level (nature and scope vary on a case by case basis).
The main environmental regulations applicable to the mining industry are included in the FMC. In addition, Minimum Environmental Standards Legislation applies to the mining industry in the whole country, together with any supplementary regulations issued by the provinces.
The two most relevant parts of the Minimum Environmental Standards Legislation for the mining industry are the General Environmental Law 25,675 (“General Environmental Law”) and the National Minimum Environmental Protection Standard Law for the Protection of Glaciers and Periglacial Environment, Federal Law No 26,639 (“Glacier Protection Law”).
Furthermore, some specific Federal Environmental regulations apply when there is an inter-jurisdictional activity. The competent authority in charge of applying such regulations is the Federal Environmental Authority.
National Congress sometimes enacts legislation related to aspects that are not vested upon the Federal Government and are therefore not applicable in the province unless the province adheres thereto. Such legislation generally contains an express invitation for provincial governments to adhere thereto (adhesion is not mandatory for provinces). In those cases, the competent authority in charge of applying such regulations is the Provincial Authority, which can also enact its own supplementary rules. The National Hazardous Waste Law is an example of both, since it applies to interprovincial activities but also contains an invitation for provinces to adhere thereto.
An important source of environmental legislation, as explained further below, is the local or provincial environmental regulations, issued in exercise of non-delegated powers, or for supplementing the Minimum Environmental Standards Legislation, the FMC and/or other Federal legislation applicable in the respective province (eg, Federal legislation to which the province has adhered).
Furthermore, in some cases, and based on the Provincial Constitution, municipalities are empowered to issue certain types of environmental regulations or even participate in the provincial environmental impact assessment process.
Also, through inter-provincial bodies or councils, provinces may agree on certain standardised environmental principles that are applicable in all provinces that adhere to this sort of interprovincial environmental agreements. An example of this is the COFEMIN Supplementary Regulation (Bariloche 1996), which consists of a regulation that further regulates the environmental chapter included in the FMC and was adopted as a supplementary regulation by different provinces. Such regulations contain a description of the content that a mining Environmental Impact Report (EIR) for the prospection, exploration and exploitation stages should include.
The treatment, decision and control of environmental matters in each provincial jurisdiction are the jurisdiction of local authorities, without any participation from national authorities. The only exceptions to this rule are inter-jurisdictional or cross-border issues, and regulations arising from treaties.
Accordingly, the rule is that provincial authorities are the competent authorities for enforcing environmental regulations arising from the Minimum Environmental Standards Legislation and the FMC, and of course from any other provincial environmental legislation.
After obtaining the relevant permits, miners may freely exploit their mining concessions, without being subject to rules other than those pertaining to their safety, police and environmental protection. The protection of the environment and the preservation of the natural and cultural heritage in the mining activity field shall be subject to the provisions of the FMC and other applicable environmental regulations.
Moreover, the General Environmental Law establishes that any person engaged in activities that may endanger the environment, the ecosystems and their elements, shall take out insurance with adequate coverage to ensure the funding of restoration activities intended to repair any damages caused; in addition, depending on the case and possibilities available, it may contribute to an environmental restoration fund allowing the implementation of remedial actions.
The Glacier Protection Law protects certain glacial and periglacial geoforms that have a proven hydraulic function as water basin suppliers or water reserves. This mainly includes uncovered glaciers, covered glaciers and rock glaciers with hydraulic functions.
Direct intervention in the protected geoforms by new mining projects (those that started after the enactment of the Glacier Protection Law) is forbidden. Projects existing prior to the enactment of the Glacier Protection Law need to undergo a new environmental audit to confirm that they do not significantly affect such protected geoforms. A Glacier Inventory has been completed and published in 2018.
Some provinces (considered to be anti-mining) have issued local environmental legislation forbidding certain mining methodologies (such as open pit) and the use of certain hazardous substances for mining processes (such as mercury or cyanide). For such reason, it is very important to review the local environmental standards in each province before deciding on the acquisition and/or development of any mining activity.
There are certain protected areas and reserves that forbid the performance of mining activities, according to their applicable legal framework and/or management plans and rules (eg, certain glaciers, national parks, etc). In these areas, mining is usually prohibited.
Public participation is mandatory during the procedure to approve the environmental impact assessment of mining projects (according to the Federal Environmental Law No 25,675 and similar provincial legislation). Moreover, the environmental impact report must consider the project’s social impacts and propose mitigation measures.
As regards to indigenous people, a prior consultation must be carried out in certain cases (under International Labour Organisation Convention No 169 and other regulations).
The General Environmental Law establishes that the provinces shall institutionalise a consultation procedure or public hearing as a mandatory stage to authorise those activities that may have significant adverse effects on the environment. The instance of citizen participation should be carried out prior to the authorisation granted to a natural resource exploitation project (such as a mining project).
This instance of citizen participation is usually fulfilled in the context of the analysis by the Government of an Environmental and Social Impact Assessment (ESIA) prior to the granting of any authorisation. Its omission, or its late compliance, could imply the nullity of the authorisation.
The ESIA provides an appropriate framework for the development of citizen participation, since its purpose is to evaluate the possible impact that a project could have on a specific community. The public consultation is the instance at which the Authorities and those who will carry out the project must inform the community of all the relevant aspects of the project.
Citizens’ involvement shall be ensured mainly during the environmental impact assessment processes. Previous public consultation procedures are the responsibility of the competent authority, prior to the issuance of the resolution deciding on the approval of the ESIA. The outcome of the consultation procedure is not binding, but it has to be duly addressed by the permit.
According to the Argentine Constitution and Convention 169, indigenous communities have the right to be recognised by the Authorities (at Federal and Provincial level) as entities with legal status. This allows them to act as entities with collective rights, such as community ownership of lands they inhabit and property of the natural resources existing there.
When recognising the legal status of indigenous communities, the Authorities registers them in a special registry, where other relevant information is also recorded, such as the structure of their organisation, their authorities and the appropriate consultation procedure that they require in order to give them proper participation in accordance with their own traditions.
However, the obligation of the Authorities to grant legal status to an indigenous community when it is requested does not imply that indigenous communities have an obligation to make such request. Convention 169 and many Federal and Provincial regulations determine that it is enough for individuals to consider themselves as indigenous for Authorities to recognise their ethnic identity and the lands on which they live.
National and some Provincial Authorities have issued regulations related to implementation of Convention 169.
In Argentina, and depending on the province, the instance of citizen participation and the instance of indigenous communities’ participation may be held separately or carried out simultaneously.
It is worth mentioning that in most cases it is not necessary that the indigenous communities give their consent to a mining project, sine this is restricted to some very exceptional cases specifically identified in Section 16 of Convention 169 (when relocation of the indigenous community is required).
Opposition by indigenous communities to the performance of any activity in a public consultation process is not binding on the Authorities. In any case, the validity and legality of the approval act will depend on how the Authority has responded to the observations and questions of the indigenous communities.
It is not usual to have community agreements for the development of mining projects in Argentina. As a general rule, it is not mandatory to enter into such agreements. Only in certain cases have these agreements have been entered into with local communities and/or municipalities. It is likely that the negotiation and execution of these agreements will become common practice in the future. In the last few years, local authorities have been negotiating and executing with mining companies' agreements mainly focused on the contribution to public infrastructure.
Mining projects sometimes face social opposition in Argentina. Most of the times, communities’ claims are related to environmental concerns (mainly, regarding water). It is recommended that community relations are properly handled from the very beginning in order not to let the conflict escalate. Allowing public participation and the early release of public information - in a clear and plain manner - could be the key to success.
Frequently, when these matters are properly addressed, mining projects are developed as planned. However, there are some examples in Argentina in which social opposition was the main drawback on the development of a project (eg, Chilecito and Famatina, La Rioja; and El Desquite, Chubut).
Currently, there are no relevant nationwide initiatives to deal with climate change that particularly affect the mining industry in Argentina.
No climate change legislation related specifically to mining has been passed nationwide, nor is any currently being discussed.
It is relevant to mention that Argentina has approved several regulations regarding this matter, eg, the United Nations Framework Convention on Climate Change (Federal Law No 24,295), the Kyoto Protocol to the UNFCCC (Federal Law No 25,438), the Doha Amendment to the Kyoto Protocol (Federal Law No 27,137) and the Paris Agreement (Federal Law No 27,270). Moreover, the Climate Change Federal Cabinet was created in 2016 (Federal Decree No 891/2016).
On 20 November 2019, the Federal Congress passed a new Climate Change bill (publication in the Official Gazette is pending).
There are several sustainable development initiatives both in the federal and provincial level. They are mostly related to energy efficiency, renewable energy, use of clean technology, improvement of public infrastructure, reduction of the carbon footprint, and the use of good practices on agribusiness, among others. For instance, it could be highlighted that, due to the approval of the 2030 Agenda for Sustainable Development, the Federal Government has adopted eight goals and 100 standards, which - among other matters - refer to the need to mitigate climate change and its effects.
In Argentina, there are three levels of authority that may create and levy taxes on individuals, companies, branches of non-resident companies and permanent establishments, namely the Federal Government, the Provinces (or States) and the Municipalities (or Counties).
The main Argentine taxes applicable to individuals, companies, branches of non-resident companies and permanent establishments are as follows:
Income Tax Law (ITL) subjects all income from Argentine and/or foreign sources obtained by Argentine residents (on a worldwide basis) to tax. Non-residents are taxed only on their Argentine source income. Permanent establishments are considered as residents and taxed accordingly.
Value-Added Tax (VAT) is levied on the sales of movables in Argentina, on contracts for the performance of works and services in general, and on imports of movables. VAT is also payable on services rendered from abroad which are effectively used in Argentina, and on leases of real estate (with some exemptions). The general rate of this tax as established in the VAT law is 21%, although a reduced rate of 10.5% or an increased rate of 27% could be applicable in certain cases.
Personal Assets Tax is basically imposed on all existing assets held by resident individuals and estates that are located in Argentina and abroad, and by non-resident individuals and estates that are located in Argentina, as of December 31st each year. Recently, Argentina set a more burdensome tax treatment for the assets of Argentine residents located abroad (unless there is partial “repatriation”).
Tax on Bank Credits and Debits is levied on any credit and debit in a bank current account. The general tax rate applicable is equal to 0.6% for each credit, and 0.6% for each debit. There are specific tax rates for precise.
Excise Tax (or Internal Tax) is levied on producers, manufacturers or importers of goods expressly designated by the law (eg, insurance, tobacco, spirits, soft drinks, certain automobiles, motors, wine, etc), and applies to only one stage of production. The applicable rates vary according to the goods concerned and, in general, are imposed on the sales price.
The importation of goods is generally subject to the payment of import duties and other taxes. The duty rate varies depending on the kind of good imported. Financial costs associated with imports are VAT (10.5% or 21%) and payments in advance of some taxes (typically VAT, income tax and turnover tax on goods other than equipment). Such costs are recovered against domestic sales or refunded against exports.
Export duties are assessed according to the tariff number of the goods being exported. The basis is FOB value. Export duties are applicable to all Argentine exports, with the following features:
Turnover Tax (or “Impuesto sobre los Ingresos Brutos”), which is a tax on gross income, is the most relevant tax within the general Argentine Provincial Tax system; it is also levied in the City of Buenos Aires. This tax is levied on all kinds of industrial or commercial activities carried out habitually and for a consideration. The tax base comprises gross income (or the total amount received in cash, in kind or as a service) accrued from the taxpayer's commercial activity, and its tax rate varies depending on the activity and the jurisdiction. Exemptions are available for many industrial activities, subject to certain conditions, as a result of a tax agreement entered into between the Federal Government and the provinces. The applicable rate varies depending on the province in which the activity is carried out.
Stamp Tax is levied by the Buenos Aires City Government and by most provinces on documents evidencing transactions for a consideration, such as contracts, acknowledgment of debts, incorporation of companies, promissory notes, corporate capital increases, transfer of real estate, etc. The applicable rates vary according to the transaction. Some provinces have repealed this tax on financial, insurance and other kind of transactions related to agricultural, industrial, mining and construction activities. According to compromises assumed by the provinces, the Stamp Tax should be abrogated by 2022.
Mining Royalties are not taxes, but are mandatory payments that must be made to the province in connection with effective production (in addition to any contractual royalties that may exist in each particular case). The maximum royalty payable to a province that has adhered to the Mining Investments Law should not exceed 3% of the “mine head value” of the mineral extracted. In some cases, the provinces negotiate and execute agreements with the mining companies for the purposes of setting up specific methods of calculation and/or anticipated payments of royalties.
Duties and fees on municipal taxes are grouped into various categories, the configuration and amount of which depend on the jurisdiction in question. According to the jurisdiction, the municipal taxes could be significant.
Double Tax Treaties
Argentina has valid treaties in force for the avoidance of double taxation and fiscal evasion with the following countries: Australia, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain, Sweden, Switzerland, the United Arab Emirates and the United Kingdom.
Through the application of these treaties, a non-resident, among other benefits, might considerably reduce (or avoid) Argentine withholding taxes (eg, Income Tax). Furthermore, under the provisions of some of the treaties, shareholdings owned by non-residents may be excluded from the Tax on Personal Assets. In general terms, the treaties follow the OECD and UN Model Convention (except the treaty with Bolivia, which follows the Andean Model).
The promotional legislation applicable to mining investment in Argentina includes the following benefits, arising from a Law specifically enacted in the 90's to promote mining investments (Mining Investment Law or “MIL”):
It is also worth stating that some Provinces have created a forced participation in private companies for the exploitation of certain minerals that have been considered to be strategic. Such is the case of lithium in Jujuy, where a Provincial state-owned company has been imposed as a mandatory shareholder in companies exploiting lithium projects.
Argentina law provides several types of legal entities by means of which business activities may be carried out in Argentina. The corporation (Sociedad Anónima or SA), the wholly owned corporation (Sociedad Anónima Unipersonal or SAU) and the limited liability company (Sociedad de Responsabilidad Limitada or SRL) are the most common types of business organizations used as investment vehicles. Act No 27,349 issued on 12 April 2017 created a new type of legal entity, the simplified corporation (Sociedad Anónima Simplificada or SAS).
Gains from the transfer of SA, SAU and SAS shares, SRL quotas and other securities are subject to Argentine income tax (IT), regardless of the type of person who obtains the income.
Capital gains obtained by Argentine corporate entities derived from the sale, exchange or other disposition of shares are subject to IT at the rate of 30% for fiscal years beginning on or after 1 January 2018 and up to the fiscal year beginning on or after 1 January 2021, and at the rate of 25%. Income obtained by Argentine resident individuals from the sale of shares is subject to IT at a 15% rate on net income, unless the securities were traded on a stock market or have public offering authorisation, in which case, under certain conditions, an exemption applies.
Capital gains obtained by non-Argentine resident individuals or non-Argentine entities from the sale, exchange or other disposition of shares are exempt from IT to the extent that the shares are issued by an Argentine company and are authorised for public offering by the Argentinian Securities Exchange Commission (Comisión Nacional de Valores or CNV). The exemption on the sale of Argentine shares applies only to the extent that the foreign beneficial owners reside in, and their funds come from, jurisdictions considered as cooperative. If the exemption does not apply, the gain derived from the disposition of shares is subject to Argentine IT at either a 15% rate on the net income or a 13.5% rate on the sales price. Please note that these rates may be reduced in certain scenarios due to the application of a Double Taxation Treaty.
In addition, some indirect tax may apply to the transfer of shares. At the federal level Tax on Credits and Debits in Argentine Bank Account may apply and at provincial level, Gross Turnover Tax, Stamp Tax and Free Transfer of goods tax also may apply.
Please note that in Argentina there are new Controlled Foreign Corporation (CFC) regulations by which most of foreign vehicles would be considered transparent for tax purposes. In this regard, the new CFC legislation implemented under the Act No 27,430 (the “Tax Reform Act”) requires specific and detailed analysis to determine whether the Argentine resident should be taxed on, even where no dividend or profit distributions were made by the foreign controlled vehicle.
At provincial level, further analysis of the local jurisdictions involved should be performed in this regard.
The main features for attracting investment for mining are a stable and long-lasting mining legal framework, the solid title investors can obtain over mineral deposits which have no time limit and the promotional investment regime applicable to mining.
Argentine legislation welcomes foreign investments in productive and industrial activities, as well as in those areas requiring the rendering of services. The current legal framework is based upon the principle of non-discrimination among local and foreign investors, clearly evidenced by the facts that no legal authorisation is required to make a foreign investment in productive and industrial activities; foreign companies are not prevented from engaging in productive and industrial activities; and it is explicitly stipulated that foreign investors will not be subject to discrimination.
The legal framework specifically applicable to the development of mining activities in Argentina particularly favours investment, either foreign or local.
Also, it is worth mentioning that Argentina has entered into Bilateral Investment Treaties (BITs) with several countries, including Australia, Austria, Canada, Chile, China, Croatia, Denmark, Finland, France, Germany, Israel, Italy, Malaysia, Mexico, the Netherlands, New Zealand, Peru, Russia, Spain, Sweden, Switzerland, the United Kingdom and the United States of America.
Argentina also has an Integration and facilitation Mining Treaty executed with Chile.
In our jurisdiction, the main sources of finance for exploration, development and mining are of foreign origin, mainly financing and equity provided by foreign entities and investors. In the last few years, some local businesses have started to invest equity in small mining projects, but there are no other local sources of financing.
Domestic securities markets have no role in the financing of exploration, development and mining in Argentina. There are no mining companies listed in local securities markets. Foreign securities markets have an important role in the development of mining activities in Argentina, since almost all of the mining investment is made by foreign investors, many of which are listed in foreign securities markets.
The most suitable securities available over mining tenements and related assets in the context of exploration, development and mining finance in Argentina are detailed below.
A mortgage is a right in rem constituted as security over immovable assets that continue in the control and possession of the debtor. Although mortgages are also created over other types of assets (eg, vessels and airplanes), they are typically created over immovable assets including real estate, mining concessions and fixtures thereto. A mortgage provides an interest to the extent of the secured debt obligation over the real property and the fixtures thereto in respect of which the mortgage is granted. In insolvency proceedings, the mortgagee has a special preference in respect of the real property over which the mortgage is granted. More than one mortgage can be granted in respect of a real property, and, unless the mortgagees agree otherwise, the mortgages will rank in order of registration.
Pledges may be divided into two categories: possessory pledges and registered pledges. Both possessory and registered pledges provide an interest to the extent of the secured debt obligation over the property in respect of which the pledge is granted. In insolvency proceedings, the pledgee has a special preference in the property over which the pledge is granted. A possessory pledge requires that there be a displacement – actual or symbolic of the assets over which the pledge is granted such that – when actual - the assets are removed from the possession of the debtor and placed in the control of the creditor or its agent. The displacement must take place as required by the rules regulating the transfer of ownership of a given asset. Tangible moveable property (equipment, machinery, fungible assets, stocks, negotiable documents) and intangible property (credits, contractual rights and certain legal rights) can be pledged by means of possessory pledges. Since a displacement is required for a possessory pledge, a possessory pledge cannot be created over after–acquired property.
In contrast to a possessory pledge, a registered pledge does not require the pledged assets to be in the secured party's possession. Moveable property, such as equipment, motor vehicles, raw materials, products and spare parts, can be subject to registered pledges. Moveable assets that are fixtures as a result of moral accession, including, machinery, equipment, instruments, animals and vehicles employed within a mining concession for its development on a permanent basis, can also be subject to registered pledges. No intangible assets can be pledged by means of a registered pledge, except for trademarks.
Registered pledges are divided into two categories: fixed pledges and floating pledges. A fixed pledge is a pledge granted over identifiable moveable tangible assets or trademarks. A floating pledge is a pledge granted over fungible moveable assets or assets which are transformed thereafter into different assets (eg, raw materials or parts of an asset). A floating pledge may be granted over fungible after-acquired property, provided that the debtor pledges some existing property of the same category of assets at the time when the pledge is created (Decree Law No 15,348/46, Section 14). Otherwise, the debtor may not grant a registered pledge over the after-acquired property until it is acquired.
Fiduciary assignments into trusts (fideicomisos) as security under Argentine law, are commonly used as a security arrangement in Argentina. Under a fideicomiso as security, all of the collateral is transferred, usually by means of a fiduciary assignment of the assets to be conveyed into the fideicomiso to a trustee (fiduciario) (the "Security Trustee"), which segregates the assets and holds them as fiduciary property for the designated beneficiaries. The designated beneficiaries would be the secured parties, to the extent of their interests, and the grantor, to the extent of any residual interest. Property acquired after the fideicomiso as security is created can be either directly acquired by the Security Trustee or incorporated from time to time into the trust by means of new assignments.
Fideicomisos may be created by private agreement under Argentine law. Should the trust assets be rights in personam (ie, contractual or legal rights), rules relating to the assignment of rights apply and the obligor must be served notice of the fiduciary assignment. In addition, any registrations or filings normally required to transfer a specific assets (eg, motor vehicles, real estate, shares and mining concessions) must be made to effect a transfer of the assets to the Security Trustee. For some types of assets, these notices and registrations, when required, are a condition to the enforceability of the fiduciary assignment against third parties. A fiduciary assignment operates to convey the trust assets (subject to the debtor's reversionary interest) from the estate of the debtor to the trustee. As a result, no registration of the assignment is required (other than as referred to in the preceding paragraph) to perfect the trustee's interest against creditors of the debtor.
Fideicomisos as security may permit creditors to have possession of, and to continue to operate, the encumbered assets while the manner of ultimate realisation is decided. No judicial intervention is needed to enforce a fiduciary assignment of assets into a trust under Argentine law, provided that the Security Trustee already holds the assets as fiduciary property for the benefit of the secured creditors. Also, it is arguable that judicial intervention is not required for the trustee to transfer the assets to the secured creditors, as beneficiaries of the trust.
Argentina is currently changing its Administration. Although it is not possible to foresee whether Argentine economics will improve in the short term, it is very clear that the new Administration will focus on creation of jobs, development of the industry a foster of investments. It is expected that the current legal framework will remain in place, and it is possible that the new Administration will enact new promotional regimes aimed to attract investments in the short term, mainly related to the development of projects of intensive capital investment, like extractive industries.