BY ATTY. JULIUS GREGORY B. DELGADO
RA 12253 (ENHANCED FISCAL REGIME FOR THE MINING INDUSTRY ACT)
Last September 4, 2025, President Ferdinand R. Marcos, Jr. signed into law Republic Act No. 12253, otherwise known as the Enhanced Fiscal Regime for the Mining Industry Act. The law consolidates the provisions of House Bill No. 8937 and Senate Bill No. 2826. The Law seeks to simplify and rationalize the fiscal regime for large-scale metallic mining, ensuring an equitable share of mining revenues for the government while upholding the principles of transparency, accountability, and good governance in the mining industry.
Key salient features of this Law include:
- Imposing a 5-tier, margin-based royalty at rates ranging from 1% to 5% on income from metallic mining operations outside mineral reservations, and a minimum royalty rate of 0.1% on gross output for mines below the margin threshold;
- Introducing a 5-tier, margin-based windfall profits tax at rates ranging from 1% to 10% on income from metallic mining operations;
- Implementing a 2:1 debt-to-equity ratio or a thin capitalization rule applicable to related-party debt, to limit the amount of tax-deductible borrowing costs arising from the debt;
- Adopting a ring-fencing rule on a per-project basis to prevent the consolidation of mining project income and expenses by the same taxpayer, thereby preventing companies from offsetting losses from more profitable mining projects;
- Clarifying that the applicable local business tax rate on mining contractors is 0.5%; and
- Retaining the imposition of: (i) the 5% royalty for mines inside mineral reservations; (ii) 25% corporate income tax (CIT); (iii) 4% excise tax; (iv) 1% (minimum) indigenous people royalty; (v) applicable withholding taxes, among others.
In my humble opinion, while the Law will surely generate the much-needed revenue in the short term, i.e., the estimated revenue impact from 2026 to 2029 is projected at PhP25.08 billion in total or an average of PhP6.26 billion per year, it may not contribute to revitalizing the mining industry as it will drive away potential investors, both international and domestic. Already heavily regulated, this additional tax burden may push capital to other industries. To generate more revenue, it could have been a good strategy to entice investors to put up processing plants which will process the ores and generate more taxes for the finish products. For now, mining companies would brace the impact of this new mining fiscal regime, except those with government contracts which ensures that only favorable provisions of a prospective law will be applicable invoking the constitutional right against impairment of contractual obligation to argue inapplicability of unfavorable provision.