On 19 December 2017, Law 13,540/2017 was passed, bringing material changes to the calculation methods and rates of the financial compensation for the exploitation of mineral resources (compensação financeira pela exploração de recursos minerais, “CFEM”). The changes were brought about by the conversion of Provisional Measure 789/2017 into law, although the Congress made substantial changes to the Presidential text.
CFEM is calculated on:
- the sale price, less applicable taxes, when the purchase is made from holders of the exploration licences and garimpos (and on the winning bid amount when the purchase occurs via public auctions imposed by law);
- on consumption, calculated over the market value of the mining asset in that market, after processing is concluded; and
- on exports, calculated in accordance with article 19-A of Law 9,430/1996 and applicable rules issued by the Federal Revenue Department (benchmark prices are used in the calculation).
The new CFEM rates are as follows:
- 1% for rocks, sand, gravel, clay and other mining substances for immediate use in civil works, as well as for mineral and thermal water;
- 1.5% for gold;
- 2% for diamond and other unspecified mining substances;
- 3% for bauxite, manganese, niobium and rock salt; and
- 3.5% for iron ore.
Although the passing of Law 13,540/2017 brings to an end a lot of uncertainty in relation to the applicable CFEM rates, there is still much uncertainty as to what factors will be taken into account for the iron ore-related CFEM rate reductions. Provisional Measure 789/2017 included a progressive rate based on the IODEX index, but that is now no longer applicable.
Changes to the Mining Code Reversed
Provisional Measure 790/2017 was signed by President Temer on 25 July 2017. The Measure was intended to bring various changes to the Brazilian Mining Code (including creating special regimes for mining exploration allowing for exploration periods of four years instead of two).
As the Brazilian Congress did not convert the Measure into law within the time constraints provided in the Federal Constitution, the Measure lapsed and Code was reverted back to its previous drafting.
Last modified: November 5, 2019