Republic Act No. 12253: Strengthening the Fiscal Regime for Large-Scale Metallic Mining

By : Atty. Charisa L. Belista, Frences Rose L. Cesista, and John Dave C. Colorge | 10 April 2026

The Philippines is home to abundant metallic mineral resources such as nickel, copper, gold, and chromite. These minerals are not only vital for traditional industries but are also essential for modern technologies, including electric vehicles, renewable energy systems, and advanced manufacturing. Despite this wealth, the way mining companies were taxed and regulated in the past often failed to ensure that the Filipino people and the government received a fair share of the value generated from these resources.

To address these concerns, the government enacted Republic Act No. 12253, known as the “Enhanced Fiscal Regime for Large-Scale Metallic Mining”, which was signed into law on September 4, 2025. The law updates the fiscal and regulatory framework for large-scale metallic mining operations with the objective of simplifying the fiscal system, attracting responsible investment, increasing government revenue, and promoting transparency and good governance in the mining sector.

Prior to the enactment of this law, the fiscal system for mining in the Philippines was fragmented and, at times, inconsistent. Different types of mining agreements were subject to different tax treatment, creating confusion and sometimes enabling opportunities for tax avoidance. Moreover, there was also no systematic mechanism for the government to benefit from windfall profits when global metal prices surged. These gaps meant that communities near mining sites, as well as the nation as a whole, did not always receive the full economic benefit from the extraction of mineral resources.

Recognizing these challenges, lawmakers designed RA 12253 to establish a clearer and more equitable fiscal framework that balances the interests of mining companies with those of the Filipino people. The law applies to all large-scale metallic mining operations in the country and reform tax rules and other fiscal mechanisms under the National Internal Revenue Code (NIRC) to ensure companies pay taxes based on their profitability and the value of the minerals they extract.

One of the most significant features of the law is the introduction of a tiered royalty system. A royalty is a payment that mining companies make to the government for the right to extract the State’s mineral resources. Under RA 12253, mining companies operating outside designated mineral reservations are required to pay a tiered royalty based on their profit margins, with royalty rates ranging from 1% to 5%. Companies operating with very low profits or even at a loss still pay a minimum royalty of 0.1% of the gross output of minerals produced. Meanwhile, mining operations located within mineral reservations continue to pay a 5% royalty on gross output. This tiered structure ensures that more profitable operations contribute more to the government while protecting less profitable operations from excessive taxation, particularly during periods of economic downturn.

In addition to the taxes imposed under the NIRC, RA 12253 also introduces, a windfall profits tax. This tax applies when global metal prices rise significantly, resulting in unusually high profits for mining companies. The tax rate is tiered from 1% to 10%, depending on the level of profit. Through this mechanism, the government can capture a share of extraordinary gains generated during commodity price booms, allowing these additional revenues to support public services, infrastructure, and community programs.

The law also introduces a thin capitalization rule, which limits the deduction of interest on loans that mining companies may deduct from their taxable income. RA 12253 amended the NIRC to provide that metallic mining contractors or operators may deduct interest expenses only on debts that fall within the allowable related-party debt-to-equity ratio of 2:1, measured quarterly during the taxable year. This rule discourages excessive borrowing from related parties for the purpose of reducing taxable income, while still recognizing the capital-intensive nature of mining operations and encouraging legitimate investment in the sector.

Another significant reform under RA 12253 is the ring-fencing rule, which treats each mining project as a separate entity for tax purposes. Previously, companies could offset profits from successful projects with losses from others projects to reduce overall tax liability. By requiring that each project report and pay taxes independently, the government ensures that taxation reflects the true economic performance of individual mining operations. The law also states that when a mining project is carried out by a contractor for a mining operator, the tax liability will be borne by the mining operator, not the contractor.

The law also strengthens monitoring, transparency, and accountability mechanism in the mining sector. The Bureau of Internal Revenue, together with the Bureau of Customs, is empowered to examine and audit mineral sales and exports to ensure accurate reporting of production volumes and values. Mining companies are still required to maintain transparent records, provide relevant data to government agencies, and disclose certain information to the public. These measures help reduce tax leakage, promote confidence among stakeholders, and ensure public transparency and trust. Additionally, the Department of Finance, in cooperation and coordination with other relevant agencies, are entrusted with the duty to institutionalize an inclusive and participatory mechanism in accordance with The Philippine Ecosystem and Natural Capital Accounting System (PENCAS) Act. This initiative aims to improve how the country measures and manages the environmental and economic value of its natural resources.

Local government units where mining operations occur also benefit under RA 12253. The law expands and improves the distribution of tax revenue to provinces, cities, municipalities, and barangays that host mining activities. This ensures that communities directly affected by mining operations receive a fair share of the benefits, which can be invested in local development, public services, and community programs.

Further, part of the royalties collected from mining within mineral reservations, equivalent to 10%, is earmarked for the Mines and Geosciences Bureau which supports mineral exploration, research, and laboratory facilities. This strengthens the development of policies, guidelines, and reforms to ensure environmental protection and responsible mining. This approach also helps the government better understand and manage the country’s mineral resources while promoting responsible development.

Conclusion

            Republic Act No. 12253 marks a significant policy shift toward a more rational, equitable, and transparent fiscal regime for large-scale metallic mining in the Philippines. By imposing profit-sensitive royalties, a windfall profits tax, and stronger transparency mechanisms, the law seeks to ensure that the State and host communities receive a fairer share of the country’s mineral wealth, while still preserving the sector’s viability for legitimate and responsible investment. In essence, the law reflects the government’s move to align mineral resource development with fiscal accountability, public benefit, and long-term sustainability.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and opinions of the Firm or any of its partners. This article shall not be construed as official legal advice from the Firm.  

Atty. Charisa L. Belista is a Senior Associate of DARGON Law whose practice focuses on corporate, immigration, and labor and employment law. She brings a practical and business-oriented legal perspective to the Firm, strengthened by her academic background in both human resource management and law.

In her professional experience, Atty. Belista has been involved in handling matters relating to corporate operations, labor compliance, employment relations, family law, and criminal and civil litigation. She assists clients in navigating legal and regulatory requirements, addressing workplace issues, and ensuring adherence to applicable labor and corporate standards.

Atty. Belista earned her Bachelor of Science in Business Administration, major in Human Resource Development Management, from University of Santo Tomas in 2015, and obtained her Juris Doctor degree from Arellano University School of Law in 2021.

She was admitted to the Philippine Bar in 2022.

Frences Rose L. Cesista is a second year Juris Doctor student at San Beda University–Manila with a BA in Political Science from Far Eastern University.

John Dave C. Colorge is a third year Juris Doctor student at San Beda University–Manila with a BS in Management Accounting from the University of Santo Tomas.

For further inquiries, please contact counsel@dargonlawfirm.com or call (02) 8426-1837.