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(a) The Company must pay corporate income tax in accordance with the Tax Law for companies resident in the State; provided that:

(a) The Company income tax rate applied to the Company’s taxable income is the effective rate that applies generally to all companies conducting business in the State (including the effect of any Tax rebates or subsidies) or [X %], whichever is the lesser;
(b) The Company income tax rate on dividends paid by the Company to non-resident companies is [ __x__ ];
(c) The Company income tax rate on interest paid by the Company to non-resident companies is [X %], other than on interest paid to any multi-lateral agency funding the Project which is exempt from income tax under the Tax Law; and
(d) The additional deductions allowable under this Agreement must be deductible in computing income chargeable to Tax.

b) The State confirms that:

(a) All dividends paid by the Company to a non-resident shareholder will not be considered as the State income to that shareholder;
(b) All interest paid by the Company to a non-resident lender will not be considered as the State income to that lender;
(c) Any income that the Company, lender or shareholder earns in the State on the deposit of interest or dividends is subject to the Tax Law;
(d) Realized foreign exchange gains are income and realized foreign exchange losses are deductible in calculating the Company’s chargeable income; and
(e) Income derived from money retained outside the State is the State-sourced income. Tax paid on that income in a foreign jurisdiction may be credited in computing income chargeable to Tax.

* Note on examples: The tax provisions of many actual agreements are long and complex, thus the following examples have been edited for space.

Example 1
(a) Project Activities Tax Obligations.
The Company’s tax obligations shall apply as provided in the [Code] as in effect on the Effective Date without regard to subsequent modifications, amendments or changes (other than those specified in this Section [X]) which arise under the Laws as in effect from time to time (the “Code”). The Code as in effect on the date of this Agreement, however, shall be deemed modified as specifically provided in this Section [X] and so applied. The Company shall be treated as if it were a Country permanent establishment deriving all of its income from Country sources in carrying on the Project Activities with respect to its liability for income tax under the Code as modified herein. […]

[…]

(c) Income Tax Obligations of Company.
The obligations of Company to pay income tax shall be determined each year under the Code as modified by this Section [X]. Except as otherwise validly elected by the Company under the Code, the Company’s fiscal year for purposes of computing its income tax liability under this Section [X] and its liability under Section [X] shall be the Calendar Year. The tax rate of twenty-five percent (25%) shall be applied regardless of statutory changes under the Laws, but shall take into account any limitation of the rate applicable to Country source income from a permanent establishment provided by any applicable income tax treaty between the Country and the residence country of Company. In addition to the modifications provided in Section [X] the following modifications shall apply to the Code for such purposes:
[modifications]

Example 2
a) The Company shall, while this Agreement remains in effect, pay to the Government an income tax in accordance with the provisions of this Agreement and the Applicable Law; provided, however, that all such taxes shall be nondiscriminatory within the large scale mining industry within [Host Country]. All income taxes shall be payable in respect of the Company’s income arising from its Mining Activities carried out in [Host Country] pursuant to this Agreement.

b) The rate of income tax to be assessed and paid in respect of income derived by Licensee from Mining Activities shall be [X] percent ( %) of the taxable income derived therefrom.

c) Compensation received by expatriate employees of Licensee or its Contractors shall be exempt from the payment of income tax under Applicable Law.

Example 3
Corporate Income Tax in respect of income received or accrued by the Company:

(i) The Company shall pay Income Tax on income, that is any increase in economic ability received, or accrued by the Company, whether originating from within or outside the Country, in whatever name and form, including but not limited to gross profit from business, dividends, interest and, royalties and the tax rates to be charged for the duration of this Agreement shall be as follows:

[(a), (b), (c) progressive schedule]

Should the income brackets be amended by the Government, then the tax rates mentioned in (a), (b), (c) will be applied to the amended income brackets.

(ii) To calculate the taxable income, the rules for computation of Income Tax as provided for in Annex [X] attached to and made part of this Agreement shall apply. Except as otherwise stipulated in this Agreement, the rules as provided in Income Tax Law, and its implementing regulations, shall apply.

Example 4
2.5. The annual taxable income of 0-3.0 billion [currency unit] of the Company taxable under Corporate Income Tax Law shall be taxed at the rate of 10% (ten percent). If annual taxable income exceeds 3.0 billion [currency unit] it shall be 300.0 million [currency unit] plus 25% (twenty five percent) of taxable income exceeding 3.0 billion [currency unit].

2.6. The Tax specified in Clause [X] shall not be payable by the Investor from 1 January 2011.

2.7. Tax shall be imposed on the following income of the Investor at the following rates:

2.7.1. Dividends shall be taxed at the rate of 10% (ten percent);
2.7.2. Income from royalties shall be taxed at the rate of 10% (ten percent);
2.7.3. Income from disposal of an immovable property shall be taxed at the rate of 2% (two percent);
2.7.4. Income from interest shall be taxed at the rate of 10% (ten percent);
2.7.5. Income from sale of rights shall be taxed at the rate of 30% (thirty percent).

REFER TO MMDA DISCLAIMERS AND MMDA USER’S GUIDE
PRIOR TO ANY USE OF THIS DOCUMENT.

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