Colombia's oil producers, miners to defy royalty ruling

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Tuesday, October 31, 2017

Oil producers and miners in Colombia will continue to deduct royalty payments from their income taxes, despite a court ruling that deemed the practice illegal, according to local industry associations.

The state council, Colombia's highest administrative tribunal, closed a legal loophole last Friday that has allowed companies to avoid billions of dollars in taxes since 2005.

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However, Colombian oil association ACP said companies would continue to deduct royalties - which can range from 8% to 25% of production - from their taxable income "within the framework of Colombian law."

"Royalties are for resources that belong to the government and not the companies that produce them," the ACP said in a statement.

"It would not make sense for companies to pay taxes on production that does not belong to them."

Colombian mining association ACM said the minerals sector would not be affected by the state council's decision, provided that operators complied with existing legal requirements. It added that companies needed to be examined case by case.

"The deductibility of royalties is an internationally applied practice in most countries that have mining and oil investments," ACM said. "It's not something that exists only in Colombia, as has been suggested."