Home » News » FTSE 100 » Fresnillo Plc Statement re Tax Treatment of Mining Works
Fresnillo plc

Fresnillo Plc Statement re Tax Treatment of Mining Works

In 2017 the Mexican tax authorities (“SAT”) opened a routine audit into the 2014 tax returns of two underground mining subsidiaries of Fresnillo plc (LON: FRES), relating primarily to the tax treatment of mining works, which is not explicitly dealt with in the Mexican income tax law. Subsequently, in 2018, the Company and SAT agreed on the tax treatment deemed most appropriate to mining works disbursements for the year of the audit resulting in a tax amendment, which was documented through an agreement executed between SAT, PRODECON and the Company on 30 November 2018.

Fresnillo plc has now determined it to be in the Company´s best interests to align its tax treatment across its underground mining operations subsidiaries with the Conclusive Agreement. Accordingly, Fresnillo has voluntarily elected to apply the same criteria regarding the tax treatment of mining works to all its underground mines, retrospectively for the years 2014 to 2018.

This decision has an estimated net impact on the profit & loss statement of US$8.0 million. The total amended amount is US$55.3 million of which US$39.6 million are income tax and mining rights and US$15.7 million are interest and surcharges. The Principal Amount is reclassified from deferred to current taxes and has no impact on the income statement. This Principal Amount will be offset in future years by deducting depreciation from the tax base. The total amended amount of $55.3 million has been covered as follows: US$22.2 million against tax receivables and the remaining US$33.1 million in cash. These effects will be recorded in the Company’s results for the 6 months ending 30 June 2019.