Republic Act No.12253, or the Enhanced Fiscal Regime for Large-Scale Metallic Mining Act, updated the fiscal framework governing the Philippine mining law. Signed into law on 5 September 2025, RA No.12253 amends the National Internal Revenue Code of 1997 to simplify the fiscal regime for large-scale metallic mining. The law seeks to balance the government’s goal of securing a fair share of mineral wealth with the industry’s need for predictability and competitiveness.
Enrique V Dela Cruz Jr
Senior Partner
DivinaLaw
Prior to the enactment of RA No.12253, mining industry regulations were inconsistent and had gaps in enforcement and revenue collection. Key issues included the selective application of royalties only within mineral reservations and the ability of companies to offset losses across different projects, which masked the profitability of individual operations.
The enactment of RA No.12253 was necessary to modernise and reform the fiscal regime for the large-scale metallic mining industry in the Philippines. The old system was criticised for being opaque, inconsistent, and not providing a fair share of revenues to the government and local communities. The new law addresses these longstanding issues through a more transparent and equitable tax structure.
What the law changes
Ciselie Marie T Gamo-Sisayan
Partner
DivinaLaw
Shift to a profit-based system.
Mining operations within mineral reservations remain at 5% of the gross output of minerals or mineral products extracted or produced. However, those outside are now taxed based on income margins, with rates ranging from 1% to 5%, and a minimum of 0.1% when margins are zero or negative.
The law introduces a margins-based taxation system for mining operations outside mineral reservations. Rather than taxing gross output alone, the government’s share now adjusts according to profitability.
The law also introduces a windfall profits tax, allowing the government to capture additional revenue when mining operations earn a margin of more than 30%. The rate of the windfall profits tax ranges from 1% to 10% of the net income from metallic mining operations, depending on the ratio of net income to gross output.
Ring-fencing of project costs.
Each mining project is now treated as a separate taxable entity. Under the ring-fencing rule, contractors or operators cannot offset losses from one project against profits from another. This ensures clearer project-level accounting and limits tax base erosion.
When multiple operators exist under the same mineral or financial/technical assistance agreement, each is taxed separately for its operations. Where operations are conducted under an agreement with a contractor, the operator remains responsible for paying excise taxes, royalties and windfall profit taxes.
Clearer cost recovery and audit rules.
RA No.12253 authorises the Bureau of Internal Revenue to issue detailed rules on allowable deductions, depreciation and amortisation specific to mining. The law also strengthens audit powers by requiring comprehensive cost declarations and regular reconciliation with production data from the Department of Environment and Natural Resources.
The law likewise imposes stricter limits on related-party financing. Interest deductions are disallowed for related-party loans exceeding a quarterly debt-to-equity ratio of 2:1, a move aimed at curbing excessive leverage and transfer pricing risks.
Kristina Mae C Durana
Associate
DivinaLaw
Revenue sharing with local governments.
Recognising the role of host communities, the law formalises the direct and immediate release of the share of revenues for local government units (LGUs).
RA No.12253 retains the revenue-sharing scheme in which LGUs are entitled to up to 40% of gross national collections from mining-related excise taxes, royalties and other charges, including surcharges and fines, derived from operations within their jurisdiction.
The new law introduces the mandate for the direct and immediate release of the LGUs’ share in national government collections, without the need for further action and without being subject to any lien or holdback by the national government.
A portion of royalty proceeds is also earmarked for the Metals Industry Research and Development Centre to fund downstream activities and promote value addition in the sector.
Implementation and outlook
RA No.12253 tasks the Department of Finance to issue implementing rules within 90 days and all large-scale metallic mining operations will transition to the new fiscal terms 150 days after effectivity.
Industry stakeholders acknowledge that the new law entails higher taxes, which could affect the profitability of some large-scale metallic mining operations. The success of the legislation hinges on the authorities’ capacity to ensure transparent and equitable implementation.
Enrique V Dela Cruz Jr is a senior partner, Ciselie Marie T Gamo-Sisayan is a partner and Kristina Mae C Durana is an associate at DivinaLaw in Metro Manila
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