Regarding the state of emergency declared by the Government, the Ministry defined the compliance mechanism of the annual regulatory obligations of mining concessionaires in Ecuador.
March 31 of each year is the deadline for compliance with two fundamental regulatory obligations of mining concessionaires: patent fees and annual exploration report and investment plan. However, due to the emergency situation in the country, the compliance mechanism for these obligations will be different in 2020.
The Mining Law mandates, in its article 34, that mining concessionaires must pay until March 31 of each year an annual patent fee and submit an annual exploration report and an investment plan in accordance with article 38 of the Mining Law. As previously mentioned, and with regard to the declaration of state of emergency, the mechanism to fulfill said obligations will be as follows:
Annual conservation patent:
By legal mandate, the maximum payment limit for patent fee is March 31 of each year, through form 117 of the Internal Revenue Service. In accordance with article 34 of the Mining Law, the amounts to be paid are the following:
- 2.5% of the Unified Basic Salary * each mining hectare -Initial Exploration-;
- 5% of the Unified Basic Salary * each mining hectare -Advanced Exploration and Economic Evaluation Deposit-; and,
- 10% Exploitation * each mining hectare.
It is important to note that the Unified Basic Salary increases annually in Ecuador and that by 2020 it was set at $ 400.00. Once the payment has been made, it must be registered in the Mining Management System in the account of the holder of the mining concession.
Notwithstanding the foregoing, on March 23, 2020, the Sectorial Ministry issued the Ministerial Agreement MENNR-MERNNR-2020-0014-AM by means of which it resolved to extend the term for the payment of a conservation patent for 60 days, counted from the end of the state of exception.
Despite the fact that the obligation is fulfilled with the payment and that no additional notification is necessary, it is recommended that once the state of emergency is over, the physical notification of the payment be presented to the Mining Regulation and Control Agency.
Annual Exploration Report and Investment Plan:
Unlike the patent fee, which is an obligation that is considered fulfilled with the payment, in accordance with article 38 of the Mining Law, mining concessionaires must file with the Sectorial Ministry, until March 31 of each year, an annual exploration report with respect to the activities carried out the previous year and an investment plan for the activities budgeted in the year of presentation of the report. In this case and as this obligation is non-extendable, the Sectorial Ministry, through Circular No. MERNNR-VM-2020-0002-CIR, resolved that by 2020 the reports will be submitted online through the Management System Mining and the form should be sent to the email of the Ministry as support for the presentation. As with the annual conservation patent, once the state of emergency has been lifted, the reports must be presented in physical copies and duly audited before the corresponding Zonal Coordination.
In conclusion, due to the emergency conditions in which we find ourselves, the Authorities have sought the most suitable mechanisms to facilitate concessionaire’s compliance with their annual regulatory obligations. In this case, extending the term for the payment patents fees and allowing the annual exploration reports and investment plans to be submitted electronically. Possibly the circumstances are the beginning of a change in the compliance mechanism in the future so that everything is definitely digital.
You can access the full text of the Ministerial Agreement MENNR-MERNNR-2020-0014-AM of March 23, 2020 here (Spanish version only).
Disclaimer: This document is informative and does not, and is not intended to, constitute legal advice.