PROTECCIÓN DEL DERECHO A GRAVAR LOS INGRESOS PROCEDENTES DE LA MINERÍA

The document examines how tax treaties can lead to significant revenue losses for resource-rich developing countries through indirect asset transfers, subcontractor tax avoidance, and the erosion of the tax base via technical service fees. It analyzes 86 sample treaties and provides specific drafting recommendations, such as adopting standalone extractive industry articles, expanding the definition of 'immovable property' in domestic law, and implementing lower time thresholds for permanent establishments to ensure mining revenues are captured effectively.

• Tax treaties can cause substantial revenue losses for developing countries if not specifically tailored for the mining sector. For example, Senegal reportedly lost USD 257 million over 17 years due to its treaty with Mauritius.
• Indirect transnational transfers of mining assets represent a major fiscal risk, as treaties often prevent source states from taxing capital gains when shares of a mining company are sold abroad. Only 35% of analyzed treaties protect this taxing right.
• Subcontractors in the mining sector often avoid paying taxes in the source state by structuring their activities to stay below the time thresholds required to establish a 'permanent establishment' (PE).
• The use of 'treaty shopping' allows investors to route payments through low-tax jurisdictions to avoid withholding taxes. In one case, Paladin Energy used a treaty between Malawi and the Netherlands to avoid withholding taxes on management fees and interest, costing Malawi USD 27.5 million.
• To protect taxing rights on indirect transfers, countries should define 'immovable property' broadly in domestic law to include exploration and exploitation rights, as the meaning of this term in treaties typically refers back to domestic legislation.
• The most effective way to protect taxing rights across the mining value chain is to negotiate a 'standalone article' for extractive industries. This allows for specific rules on permanent establishments, capital gains, and labor income that override general treaty provisions.
• Countries are encouraged to adopt a specific article for 'technical service fees' (similar to UN Model Article 12A) to allow taxing these payments on a gross basis without requiring the service provider to have a permanent establishment.
• Fiscal stabilization clauses in mining concession contracts can 'freeze' unfavorable tax treaty benefits, preventing a state from recovering revenue even after a treaty is renegotiated or terminated.

APA

Readhead, A., & Taquiri, J. (2021). PROTECCIÓN DEL DERECHO A GRAVAR LOS INGRESOS PROCEDENTES DE LA MINERÍA. International Institute for Sustainable Development. https://www.iisd.org/system/files/2022-01/protecting-tax-income-mining-countries-es.pdf

Chicago

Readhead, Alexandra, and Jaqueline Taquiri. PROTECCIÓN DEL DERECHO A GRAVAR LOS INGRESOS PROCEDENTES DE LA MINERÍA. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2022-01/protecting-tax-income-mining-countries-es.pdf.

Wikipedia

{{cite report |last1=Readhead |first1=Alexandra |last2=Taquiri |first2=Jaqueline |title=PROTECCIÓN DEL DERECHO A GRAVAR LOS INGRESOS PROCEDENTES DE LA MINERÍA |publisher=International Institute for Sustainable Development |date=November 2021 |url=https://www.iisd.org/system/files/2022-01/protecting-tax-income-mining-countries-es.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{readhead2021proteccin, author = {Readhead, Alexandra and Taquiri, Jaqueline}, title = {{PROTECCIÓN DEL DERECHO A GRAVAR LOS INGRESOS PROCEDENTES DE LA MINERÍA}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = nov, url = {https://www.iisd.org/system/files/2022-01/protecting-tax-income-mining-countries-es.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }