The Supreme Court will recalculate the mineral extraction tax for a platinum mining company

The problem of calculating the mineral extraction tax for miners of platinum group metals was of interest to the Supreme Court of the Russian Federation (SC). The case of the Kosvinsky Kamen company was transferred to the economic panel of the court, which insists on the right to apply a rental coefficient of 1 (used in the mining of gold and silver), since the extracted concentrates contain a share of gold. The Federal Tax Service believes that an increased coefficient of 3.5 should be applied to platinum. This made the operation of a number of enterprises unprofitable, since the tax amounted to 21–22% of revenue. Until now, practice has been in favor of tax authorities. Lawyers expect that the Supreme Court will support the company in a case that is precedent for the industry and will allow the business to return the overpayment.

The Supreme Court will consider the case on calculating the mineral extraction tax for platinum mining enterprises. The issue has become acute for the industry since January 2021, when a rental coefficient (Krenta) applied to the mineral extraction tax rate appeared in the Tax Code (TC). For the extraction of precious metals, if the concentrate contains gold or silver, the Krenta is equal to 1, in other cases it is set at 3.5. The new regulation caused differences in tax calculation between platinum mining companies and the Federal Tax Service, which led to disputes.

One of them was the case of Kosvinsky Kamen CJSC (developing the Tylay-Kosvinskoye deposit in the Sverdlovsk region, its reserves of platinum and gold at the end of 2021 amounted to 4.3 tons) with the tax inspectorate, which accrued an additional 9.3 million rubles to it for August 2021 . Mineral extraction tax and another 1 million rubles. penalties and fines.

The enterprise reflected the concentrate in the declaration (platinum share 0.7, gold share 0.0028), applying a coefficient of 1 to the tax calculation. But the tax authorities considered that the presence of platinum in the concentrate meant the use of Krent 3.5. “Kosvinsky Kamen” challenged the inspector’s decision, but the arbitration courts recognized it as legal. In their opinion, the tax is calculated on the share of each precious metal in concentrate (6% for gold and 6.5% for the rest) and for non-gold metals Krenta 3.5 should be applied. For Krent 1, the extracted concentrate “can only be gold, silver, gold-silver, which excludes the presence of platinum group metals in such concentrate.”

The company filed a complaint with the Supreme Court, explaining that the extraction of precious metals is the extraction of mineral raw materials from alluvial deposits. The metals themselves are then extracted by refineries, and not by subsoil users, so it is the concentrate that is subject to the mineral extraction tax. At the same time, Krenta 1 is established for all concentrates containing gold or silver, regardless of their share, the company emphasized.

In addition, the purpose of introducing Krent was “a more equitable redistribution of rental income,” the applicant notes, but platinum miners were already paying at a rate of 6–6.5%, while the Ministry of Finance talked about the desire, through Krent, to increase the “effective mineral extraction tax rate to 2 –3%” of revenue, bringing it closer to the global average. Moreover, for gold miners the Krenta is equal to 1, although “the price of gold is approximately two times higher than the price of platinum” (as of October 30, the cost of platinum on the world market reached $935, gold – $2005 per troy ounce). This approach violates the “principle of the economic basis of tax” and leads to “arbitrariness of taxation.” Based on these arguments, the Supreme Court referred the case to the Economic Collegium.

Managing partner of Pepelyaev Group Sergey Pepelyaev, who represents the interests of Kosvinsky Stone in court, assesses “the chances of supporting the company’s arguments in the Supreme Court as high.” According to him, the tax authorities’ proposed calculation of the mineral extraction tax for the extraction of gold-platinum concentrate “is economically illogical and has already led to the suspension of the work of the applicant and a number of other enterprises in the Sverdlovsk region and the Far East.” “Our arguments are set out in detail in the ruling on transferring the case to the board, so I hope that the Supreme Court will ultimately make a decision in favor of the industry,” Mr. Pepelyaev told Kommersant.

At the request of Kosvinsky Stone, business ombudsman Boris Titov also drew attention to the problem. He sent a request to the Ministry of Finance, pointing out the unprofitability of platinum mining at Krenta 3.5, since the tax reached almost 22% of revenue. The Ministry of Finance responded that it was preparing amendments to the Tax Code. A bill establishing Krenta 1 for concentrates with any precious metals was published on regulation.gov.ru in September, but consideration has not been completed.

BGP Litigation Advisor Valentina Semenova emphasizes that the dispute is important for the entire platinum mining industry, and the position of the Supreme Court “can speed up the resolution of the problem.” She considers the company’s arguments convincing, and the use of Krent 3.5, in her words, “puts the business on the brink of destruction.” According to Taxology partner Alexey Artyukh, paying 21–22% of revenue as mineral extraction tax “does not look like an adequate tax burden.”

Mr. Artyukh acknowledges the “ambiguity of wording” in the Tax Code regarding the application of Krent 1 to mined concentrates containing metals other than gold and silver. The lawyer believes that “the most correct solution would be legislative amendments, and immediately, and not two years later, because the problem was obvious for a long time.” He doubts that the amendments will have retroactive effect. But the Supreme Court “can give such an interpretation of the rules that will allow the tax to be recalculated retrospectively,” it all depends on the motivation, believes Alexey Artyukh. In this case, enterprises mining gold-platinum concentrate, says Valentina Semenova, will be able to apply for a refund of overpaid amounts of mineral extraction tax.

Anna Zanina, Evgenia Kryuchkova