Previous Clause | Next Clause | Table of Contents

The Company may, in calculating income chargeable to Tax in any Tax year, deduct the following costs and expenses:

(a) All royalties and other Taxes and duties payable under the Tax Law or this Agreement to the State, to any Local Government, or under a Community Development Agreement [and payments made pursuant to Section 2.4.3];
(b) All exploration expenditures, development expenditure and general and administrative expenditure incurred by the Company or on its behalf, including local exploration costs incurred in seeking further resources within the Mining Area or 5 kilometres of its perimeter;
(c) Expenditure (including payments made on borrowed or equity funds) incurred by the Company that is reasonable and necessary according to Good Industry Practice for

(a) Mining Operations (including those associated with negotiating this Agreement);
(b) Planning, financing, constructing, developing and insuring the Project;
(c) Managing, maintaining, de-commissioning and rehabilitating the Project;
(d) Mining, processing, refining, marketing, selling and transporting Minerals produced from Mining Area; and
(e) All amounts allowable for deduction in calculating chargeable income under Applicable Law,

(d) Interest incurred on loans and other financing arrangements entered into in accordance with the Financing Plan;
(e) Depreciation of plant and equipment capital costs incurred by the Company in constructing, developing and commissioning the Project up to the Date of Commencement of Commercial Production in full in the Tax year incurred with unlimited loss carry forward;
(f) Depreciation of plant, equipment and further development costs, including decommissioning expenses, acquired or incurred after the Date of Commencement of Commercial Production at the rates set out in the Applicable Law;
(g) Depreciation on any capital items including buildings, plant, equipment, Project infrastructure and lease improvements acquired for the Project, less the proceeds from the sale of those items in the Tax year, must be multiplied by x/y where:

x = the mean of the average of the monthly published buying and selling rates of the State currency against [US] currency during the Tax year for which the calculation is being made (expressed in terms of the State dollars per [US] dollar);

y = the mean of the monthly published buying and selling rates of the State currency against [US] currency during the Tax year when the money for the capital item was outlaid (expressed in terms of the State currency per [US] dollars); and

x/y is never less than 1

and where:

“monthly published buying and selling rates” means the buying and selling rate on the last business day of each month published by the Central Bank of the State, or such other buying and selling rates as may be published and recognized by the State as the official buying and selling rates.

For the purposes of this paragraph, depreciation may only be deducted for Tax purposes to the extent it does not cause income chargeable to Tax to become negative. Where it cannot be so deducted, it must be carried forward to the next future Tax year according to this Agreement;

(h) Expenditure incurred by the Company in preparing the application for any permit;
(i) Provision for rehabilitation costs in the Tax year in which the cost is incurred. Reclamation and rehabilitation costs must be debited to the provision for rehabilitation in the Tax year in which the reclamation and rehabilitation cost is incurred and not further claimed as an income Tax deduction unless the provision for rehabilitation is insufficient to satisfy that cost. Any losses or shortfall due to the provision for rehabilitation being insufficient may be carried back for a period of no more than [10 YEARS];
(j) [The State shall exempt the Company from incurring any Taxes related to the payments to local communities under Community Development Agreements;] and
(k) Any other rate, Tax charge, due, duty, tariff, or other levy paid or payable to the State or a Local Government.

Example 1
3. Subject to the provisions of the Income Tax Law and its implementing regulations, “Operating Expenses” in any year means the amount paid or accrued fix all expenditures attributable to the Enterprise in such year to the extent that the useful life is less than one (1) year. Operating expenses include, among others, the following expenses:

a) Expenses in respect of material, supplies, equipment and utilities;
b) Expenses for contracted services on behalf of the Enterprise;
c) Expenses for premiums of insurance (foreign and domestic) on tangible assets, inventories and for premiums against business and operational interruptions and for premiums against other parties indemnities claims, provided that where such premiums are paid to an affiliate, the premiums shall not exceed the amount payable in arm’s length transaction to other independent parties;
d) Expenses in respect of damage or losses to the extent that they are not fully compensated for by insurance or otherwise;
e) Expenses for royalties, interest and other payments including those to Affiliates for patents, designs, technical information and services provided that such amounts and payments shall not exceed the amount paid for similar transactions with the independent parties;
f) Amounts in respect to losses resulting from obsolescence, theft, or inventory damage that make them no longer useable in operations, supported by appropriate evidence with an official report witnessed by the Department. The amount to be deducted is the book value of such inventory;
g) Expenses for rental payment of tangible goods;
h) Expenses for Deadrent, Land and Building Tax, Royalties, uncredited Value Added Tax, Sales Tax on Luxury Goods, Stamp Duty, transfer of ownership tax, import duty and levies paid passed on this Agreement, except the Company’s Income Tax;
i) Expenses for treatment, washing, and other processing expenses;
j) Expenses for handling, storing, transporting and shipping;
k) Expenses for repairs and maintenance;
l) Expenses for commissions and discounts, including expenses paid to the Affiliates, provided that such cost and payments shall not exceed the amount should have been paid for similar transaction with independent parties;
m) Environment Management and Reclamation Costs, which is deducted from reserve for reclamation cost account;
n) Allowable for deductions governed by paragraphs [X-X] below.
[depreciation and amortization schedules]

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

Previous Clause | Next Clause | Table of Contents

Chinese (Simplified) French Portuguese (Brazil) Russian Spanish