Mining industry regulation in Armenia is based on several core pieces of legislation, including: Subsoil code, the Mining Code, Land Code, Law on Waste, Law on Environmental Supervision, Law on Environmental Impact Assessment and Environmental Expertise, etc.
Mining is the process of extracting valuable minerals or other geological materials from the earth’s crust. Mining has been a fundamental human activity dating back thousands of years and has played a crucial role in shaping civilizations and economies and continues to have a significant meaning in our daily lives. However, mining has negative environmental impacts such as habitat destruction, soil erosion, water pollution and greenhouse gas emissions, as well as social consequences in the form of displacement of local communities and changes in traditional lifestyles. To ensure that mining operations are carried out in a responsible and sustainable manner, addressing environmental, social, and economic concerns, mining is heavily regulated by governments around the world.
Is mining activity a subject to licensing?
Companies or individuals interested in engaging in mining activities are required to obtain a permit from the competent authorities, which is the Ministry of environment of the Republic of Armenia.
According to Article 20 of the Subsoil Code of the Republic of Armenia (hereinafter referred to as the “Code”), the right to subsoil use is granted through a subsoil use permit or agreement, a mountain allocation act, as well as signing a subsoil use contract with the subsoil user.
The Code adopted the principle of indivisibility of subsoil use right and established that it can belong to only one legal entity (including a commercial organization of a foreign state). The transfer of the right of subsoil use right to another person is allowed only in the case of succession as a result of the reorganization of the legal entity, with the consent of the authorized body, as well as in the case of forced expropriation through public auctions of the right of subsoil use, which is the subject of a pledge. In all other cases, the transfer of the right to subsoil use is prohibited.
For what period is the right to subsoil use granted?
According to Article 27 of the Code, the right to subsoil use is granted for a certain period of time, which varies depending on the forms of subsoil use. The Code provides for two forms of subsoil use: subsoil use for geological studies and subsoil use for mineral extraction. For the purpose of the geological study of the subsoil, the right to subsoil use is granted for a period of up to 3 years and can be extended in the cases and in the manner prescribed by law. And the right to subsoil use for the purpose of mineral extraction is granted for a period of up to 25 years in the case of metallic minerals, and for a period of up to 20 years in the case of the extraction of non-metallic minerals.
Our team will be happy to assist you in this entire process, providing legal support from the licensing stage to the ongoing operations of the company.
What are the other requirements for mining?
Before starting any project in the field of mining, it is necessary to carry out an Environmental Impact Assessment (EIA).
The Law “On Environmental Impact Assessment and Expertise” defines the processes of environmental impact assessment, state environmental impact expertise, public notification, public hearings, and provision of state expertise opinion. The main purpose of environmental impact assessment and expertise is to ensure the preservation of the positive effects of the intended activities, the prevention, reduction or exclusion of harmful effects and their consequences.
Without a positive conclusion of the state expertise, the actual implementation of the intended activity is subject to termination, with the restoration of the initial state by the person who actually implemented the activity.
What are the mandatory taxes/fees for companies operating in this sector?
According to the Tax Code of the Republic of Armenia, companies operating in the field of mining are obliged to pay royalties, fee for the use of natural resources and environmental taxes.
According to Article 197 of the Tax Code:
“1. The fee for the use of natural resources is a fee paid to the state budget of the Republic of Armenia for the effective and complex use of natural resources considered state property, as well as for the use of these resources in order to compensate for the use of natural resources in accordance with this section.
2. In the sense of the application of this section, royalty is a type of fee for the use of natural resources, which is a fee paid to the state budget of the Republic of Armenia for the purpose of compensating the use of metal minerals, as well as for the profitability obtained from the disposal of products obtained as a result of the processing of metal minerals and their or subsoil use waste, in accordance with this section”:
If the fee for the use of natural resources or royalty serves as compensation for the use of natural resources, then the environmental tax defined by the Tax Code is a tax paid to the state budget in accordance with this section in order to generate funds necessary for the implementation of measures for environmental protection.
The imposition by the state of such financial obligations on companies operating in the field of subsoil use aims to ensure the sustainable use of natural resources, while increasing also the state budget.
What guarantees are provided for the persons who have the right to subsoil use?
According to Article 25 of the Code, in the event of a change in the legislation of the Republic of Armenia within 3 years from the moment of granting the right to subsoil use, by the request of the person who received the right of subsoil use, the rates of the fees for the use of natural resources (including royalties), residents’ profit tax, non-residents’ dividends, interest rates, and royalties applicable at the time of granting the subsoil use right are applied to the latter.
Our team will be happy to assist you in this entire process, providing legal support from the licensing stage to the ongoing operations of the company.
