TAX CODE OF THE REPUBLIC OF TAJIKISTAN

PART II. SPECIAL PART

SECTION XI. TAX ON USERS OF MINERAL RESOURCES
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CHAPTER 39. ROYALTIES

Article 289. General Provisions Regarding Royalties

1. Royalties shall be a charge paid by a user of mineral resources separately for each type (for all types) of minerals extracted on the territory of the Republic of Tajikistan, regardless of whether they are delivered (shipped) to buyers (recipients) or used for one's own needs.

2. Royalties established in a mineral use contract shall be paid in monetary form, with the exception of those cases provided for under item 3 of this article.

3. In the course of operations being performed under a contract, the monetary form for the payment of royalties may be replaced temporarily, in full or in part, by in-kind payment equivalent to the monetary form, by a decision of the Republic of Tajikistan government, on the basis of a supplemental agreement between the user of mineral resources and a competent authority. When a supplemental agreement regarding the in-kind payment of royalties is concluded (signed), the provisions specified under Article 295 of this Code must be observed.

Article 290. Payers

Payers of royalties shall be users of mineral resources engaged in the extraction of minerals, including the extraction of minerals resulting from industrial processing, regardless of whether their delivery (shipment) occurred in the reporting period.

Article 291. Procedure for the Establishment of Royalties

1. The amount of royalties shall be determined in accordance with the object of taxation, the calculation base, and the rate.

2. For calculating royalties:

1) the object of taxation for all types of minerals shall be the volume of minerals extracted or the volume of the initial commercial product obtained from minerals actually extracted, calculated in the respective physical units of measure.

In this case the initial commercial product may be:

a) the minerals themselves:

- petroleum, natural gas, and gas condensate;
- coal and oil shale;
- commercial-grade ores;
- ground water, including water that has gone through primary treatment;
- mica, asbestos, raw materials for the production of building materials;
- nonmetallic raw materials for metallurgy;

b) precious metals and/or chemically pure metals in sand, ore, and concentrate;

c) concentrates of ferrous, nonferrous, rare, and radioactive metals, mining and chemical raw materials;

d) precious stones, uncut semi-precious stones and piezo-optic raw materials that have gone through primary processing;

e) for other types of minerals - mineral raw materials that have gone through primary processing;

2) the base for the calculation of royalties shall be the value of minerals determined in accordance with Article 292 of this Code;

3) the royalty rate shall be established in each contract individually for each type (all types) of mineral(s), with the exception of commonly-occurring minerals and ground water, based on the economic effectiveness of the project, following the procedure determined by the Republic of Tajikistan government and taking into consideration the provisions of items 3, 4, and 5 of this article. The minimum royalty rate for any type of mineral must be no less than 0.5 percent.

3. Royalty rates for hydrocarbons shall be established on a sliding (graduated) scale as a percentage, determined in accordance with the extraction volume in physical units of measure and/or the value of the extraction volume, based on one of the following two methods:

1) based on the volume of cumulative extraction and/or the value of cumulative extraction of hydrocarbons for the entire period of operation specified in the contract;

2) based on the volume of cumulative extraction and/or the value of cumulative extraction for each individual year of operation under the contract.

4. Royalty rates for solid minerals, including gold, silver, platinum, and other precious metals and precious stones, shall be established as a fixed percentage for the entire period that the contract is in force.

5. The royalty rates for commonly-occurring minerals and ground water shall be the same for all users of mineral resources and shall be established by the Republic of Tajikistan government as a percentage.

Royalties for commonly-occurring minerals and ground water shall be paid by users of mineral resources regardless of whether they are supplied to consumers or used for one's own needs, with the exception of the cases cited below in this item.

Royalties shall not be paid:

1) by individuals for ground water extracted on parcels of land allocated to them on a tenure or lifetime inheritable tenure basis, on the condition that this water is not supplied to other parties and is not used for production or industrial needs in the performance of commercial activity;

2) by government institutions extracting ground water for their own operating needs;

3) by users of mineral resources when they pump incidentally extracted ground water back into the ground to maintain reservoir pressure.

6. In the event that several types of minerals are extracted under the same contract, royalties shall be established and paid for each type of mineral.

7. The size of royalties payable to the budget shall be defined as the sum of the products of the value of each of the minerals extracted by a user of mineral resources in a tax period and the respective royalty rates.

Article 292. Procedure for Determining the Value of Minerals Extracted

1. For the purpose of calculating the size of royalties payable to the budget, the value of minerals extracted by a user of mineral resources during a tax period, with the exception of gold, silver, and platinum, shall be determined on the basis of the weighted average delivery price in the tax period of the minerals extracted or the initial commercial product obtained from the minerals, not including indirect taxes.

2. The value of gold, silver, and platinum extracted during a tax period shall be calculated on the basis of the average price of these metals during the tax period on the London Metal Exchange, following the procedure established by the authorized government body in consultation with the Republic of Tajikistan Ministry of Finance.

Article 293. Procedure for Payment of Royalties

1. The tax (reporting) period for the determination and payment of royalties shall be a calendar month.

2. A royalty return (statement) shall be submitted by a user of mineral resources, following the form and according to the procedure established by the authorized government body in consultation with a competent authority, to the tax authority with which it is registered before the 10th of the month following the reporting period.

3. Royalties on all types of minerals shall be paid no later than the 15th of the month following the reporting period.

Article 294. Determination of the Value of Minerals Extracted in the Absence of Sales (Deliveries)

1. In the event that there are no sales of an initial commercial product in a tax period, the weighted average selling price (not including indirect taxes) of the commercial product in the last period in which a sale (delivery) occurred shall be taken as the weighted average selling price (not including indirect taxes) for the purpose of calculating the value of the minerals extracted, with the exception of gold, silver, platinum, and commonly-occurring minerals and ground water.

2. In the event that there have been no sales at all of an initial commercial product, with the exception gold, silver, and platinum, actual expenditures on the extraction of minerals shall be taken as the weighted average selling price for the purpose of calculating the value of the minerals extracted in the tax period.

In this case the user of mineral resources shall be required to make a subsequent adjustment in the amount of royalties assessed in the tax period in which the first sale occurs, based on the actual selling price of the initial commercial product.

3. In the event that commonly-occurring minerals are not sold in a tax period, or if they are used entirely for one's own needs, actual expenditures by the user of mineral resources on their extraction and primary processing, plus a standard profit rate equal to 10 percent of the aforementioned expenditures, shall be taken as the weighted average selling price of the initial commercial product.

In the event that ground water is used as a main component in goods produced and/or services provided, actual expenditures by the user of mineral resources on its extraction and primary processing, plus a standard profit rate equal to 10 percent of the aforementioned expenditures, shall be taken as the weighted average selling price of the initial commercial product in the tax period.

Article 295. Procedure for the Establishment and Payment of In-Kind Royalties

1. In the event that a supplemental agreement to a contract is concluded for the payment of royalties in kind, a legal and tax evaluation of the agreement shall be required before it is signed.

2. The in-kind payment of royalties must be equivalent to the monetary royalties established in the contract.

3. In the event that in-kind payment of royalties is established, the supplemental agreement must indicate:

1) the recipient on behalf of the state of the portion of production output applicable to royalties (referred to hereinafter as the "recipient");

2) the location and terms of delivery.

4. The deadlines for the transfer of products by the user of mineral resources as payment of royalties which are specified in supplemental agreements must be consistent with the payment deadlines for monetary royalties established in the mineral use contract.

In this case the user of mineral resource shall transfer products to the recipient no later than the deadline for the payment of royalties established under the mineral use contract.

5. The recipient shall transfer to the budget the monetary royalties calculated by the user of mineral resources in accordance with the terms of the contract within the deadline for the payment of monetary royalties established under the mineral use contract, and shall independently monitor the timely transfer in full of the corresponding quantity of products in kind by the user of mineral resources to said recipient.

6. Following the form and in accordance with the procedure established by the authorized government body, a user of mineral resources and a recipient shall submit reporting documents to a tax authority regarding the payment of royalties in kind within the deadlines established by the contract.

7. A recipient shall bear liability in accordance with the legislation of the Republic of Tajikistan for violation of the deadlines for the transfer of funds to the budget for products received as payment of royalties and for failing to provide for the transfer of these funds in full.

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