Russia’s government has submitted proposed changes to mineral extraction taxes (MET) for Russian minerals and metals companies from 2022 to the lower house of parliament, or Duma, according to media reports, citing the draft budget proposals published on Sept. 30.
The submission of the draft proposals follows agreement between the government and the country’s biggest metals and mining companies on tax changes after more than a week of intense negotiations (GM Sept. 24, p. 33; Sept. 17, p. 30; Sept. 3, p. 31).
In the fertilizer sector, the changes will affect companies producing apatite-nepheline, apatite and phosphate ores, and potash.
Nepheline, apatite, and phosphate ores are produced by PhosAgro and the Acron Group. The draft proposals see the rent coefficient increase from 3.5 to 7 for these ores in 2022, according to an Interfax report, citing the draft budget proposals
For potash – produced by Uralkali and EuroChem – the draft proposes introducing an additional coefficient of RUB85 (approximately $1.17/mt at current exchange rates) per ton of ore mined, according to the report.
A separate MET proposal has been made for ore extracted by EuroChem’s Kovdorskiy GOK, which produces iron ore and baddeleyite, as well as apatite. According to Interfax, the MET rates set for it use a rent coefficient of RUB1:207/mt of magnetite-apatite ore, RUB82/mt of apatite-staffelite ore, and RUB132/mt of low-iron apatite ore.
The coefficient is the multiple that Russian companies are required to pay on top of the base tax rate, and is set annually. According to the report, citing the draft document, producers of nepheline, apatite, and phosphate ores will additionally need to allocate RUB2.16 billion for the MET, and potash producers RUB4.34 billion.
A rent coefficient of 3.5 to the current MET rate was introduced 12 months ago by Russia’s government for a number of solid minerals (GM Oct. 2, 2020). The multiplying coefficient was set – among others – for potassium salts (baseline rate – 3.8 percent), apatite-nepheline, apatite, and phosphorite ores (4 percent). New projects being implemented under special investment contracts (SPIC) and Investment Protection and Promotion Agreements (IPPA) were exempt from the multiplying coefficient.
The MET hike for the mineral fertilizer sector in 2022 is expected to yield some RUB10.25 billion in additional revenues for the Russian Federal Budget, according to the report, citing the draft budget documents submitted to the State Duma.
The draft changing will now face three readings in the Duma.
Surging raw materials prices pushed Russia to reconsider levies on the mining and metals industries, which traditionally have faced a lower tax burden than the oil and gas sector. A decision about linking profit tax to dividends and investments has been postponed, but the discussions on the differentiated profit tax will continue, Bloomberg reported, citing Shokhin.
The differentiated profit tax may be applied to all Russian companies, except for state-owned concerns and companies that pay less than RUB5 billion ($68 million) in the five-year period.