Seabed Minerals (Royalties) Regulations 2013

1 Tit le 2 Commencement

3 Interpretation l

4 Liability for royalties 2

5 Export value ofminerals 2

6 A voidance schemes 3

7 Returns 3

8 Records 4

9 Payrnent of royalties 4

10 Refund of overpaid royalties 4 1l Penalties 4 Regulations Titlc These regulations arr..: the Seabecl Minerais (Royalties) Regulations 2013.

2 Commencement These regulations corne into force on l ' 1 January 2014 . ..1 1ntcrprctatlon ( 1) In thëse Regulations Seabed Minerals (Royalties) Regulations 2013 Act means the Seabed Minerais Act 2009: Arm 's lcngth transaction means arm ' s length trans~1ction as dcfinccl in section 3 of the Income Tax Act 1997; Bcndït rneans one or more of the fri llowing-- (a) a reduction in the liability of a person to pay r~yalties; or (b) an entitlement lo a refund; or (c) a postponement of a Iiabi Iity for the payment of royalties; or (d) any other advantage arising because of a delay in payment of royalties: Collector means the Treasurer of the Revenue Management Division of the Ministry of Finance ami Economie Management; lncome Tax Act means tht:: lncome Tax Act 1997; Penalty means penalty payable under section 313(5) of the Act or regulation 10; Royalties means royalties imposed under these Regulations; Royalty avoidance scheme means a scheme if one of the main purposes of a person in entering into the scheme is the avoidance or reduction of any person·s liability for royalties uoder these Regulations; and Schemc includes a course of action, and an agreement, arrangement, promise. plan, proposai, or undertaking, whether express or implied, and \.Vhether or not legally enforceable. (2) Unless the context otherwise requires, any term that is not defined in these Regulations butjs defined in the Act has the meaning assigned to it under the Act.

4 Liability for royalties ( 1) A person to whom section 313 or the Act applies is li able for a royalty equal tû 3% or· the export value of minerais recovered under a mining licence. (2) The liability for royalties arises at the time minerais are recovered and must be accounted for to the Collecror in accorclance with regulation 8.

5 Export value of minerai:; ( l) Th<: export value or minerais recovered by a person is the free-on-boarcl ï•fob"ï price receÎ\'ed 0 1· recei\·able by the person for the minerais. (2) If a mint:ral is exportecl on the basis of a cost-insurance-freight ("cif') price. the export \'aluc o r the minL·ntl is lhc .cir price reducccl by the cos! of ocL'.nn l'n.:ighl und insurance so as l(l urrivL'. nl an equiqdcnt fob pricc. 2 Seabed Minerais (Royalties) Regulations 2013 (3) ·The export value of minerais recovered by a person but lost or destroyed beforë sale or othcr disposai is such amount as determinecl by the CoJJector. ( 4) If the Collcctor is sütisfied that the pricc charged for minerais is noi consistent with the price eharged ih an arm's length transaction, the Collector can substitute the price charged in an arm 's length transaction. (5) Section 56A of the lnc:ome Tax Act applics, ,vith the necessary changes nrnclc, to a transaction that is not an arm ' s length transaction.

6 Avoidance schemcs ( 1) Despite anything i11 these R.egulations, if the Col lector is satisfied that - (a) a royalty avoidance scherne has been entered into or carried out; (b) a person has obtained a bene fit in connection with the royalty avoidance scheme; and (c) having regard to the substance of the royalty avoidance scheme. it wou ld be conc luded that a person, or one of the persons, w ho entered into or c.:arried out the scheme did so for the sole or dominant purpost: of enabling the person referred to in paragraph (b) to obtain the benefit, the Collector may determine the royalty liability of the person who obtained the benetit as if the royalty avoidance scheme had not been entered into or carried out. (2) If a determination is made uncler sub-regulation ( 1) in relation to a person, the Collcc.:lnr must noti(y the person, in writing, of the cleterminatiori and make a demancl for any aJclitional royalties payable as a result of the deterrniiiation. (3) A demand under sub-regulation (2) must be made within six years from the date that the royalty avoidance scheme was carried out or entered into.

7 Returns ( l) A persan liable for royalties under section 313 of the Act and regulation 3 must furnish a return of royalties for each month stating the following - (a) the export value of minerais in re~peci of which the persan has received payment or eonsideration, or to which section 4(3) applies, during ·the rnonth; (b) the royalties payable thereon. (2) A return of royalties must be fumished by the twent.ieth day afte r the end of the month. (3) A n:turn of r,oyalties must be in the form approved by the Collector. ( 4) A return o f royalties must be furnishecl in the following manner - (a) by persona! deli very or registered post to an office of the Revenue Management Division of the Ministry of Finance and Economie Management; or (b) with the approval of the Collector, by e lectronie transmission subject to any specifications required by Collec.:tor. --,,. J Seabed Minerais (Royalties) Regulations 2013

8 Records (l) A person liable for royal ties lllUSt leep such accounts. documents, and records, inclucli ng export documentalion, thnt enabk the computation of the royalties payable. (2) The accounts. documents, and records required to be kept under sub-regulation ( 1) must be retainc<l for /'i,c ycars from the e nd of the month in ,Nhich the royalties are payable.

9 Payment of royalties ( 1) The royal ties payable by a person for minerais in respect of which the person has reccivecl paymenl or consideration, or to which section 4(3) applies, during a mon th are due on the due date for furnishîng the person 's return for the month. (2) The Ji,.1bility fo r royal ties arises by operation of section 3 ! 3(2) of the Act and this regulation, and is not dependent on the Collector making an assessment of royalties due. (3) Part XI of the lncome Tax Act, other than sections 188 and 190, applies with the necessary changes macle to royalties and penalty. lO Refund of overpaid royalties ( 1) A persan may apply to t he Co!lector for a refund of any royalties paid for a month that is in excess of the amount of royalties properly payable by the person for thaî monih (2) A n aprlication for a refond under sub-regulation (1) must be made to the Col!ector in the approved form \.Vithin three years after the date on which the royalties were overpaid. (3) If, in relation to an application under sub-regulation (1), the Collector is satisfied that royalties have beèn overpaid by a . person for a month, the Collector must refond the overpaid royalties to the person.

11 Penalties (l) A person who fails to furnish a retum of royalties by the due date is liable to a penalty equal to $10,000 for each month or part of a month the retum is not furnished. (2) Subject to sub-regulation (3), a person who knowingly or recklessly fails to keep any accounts, documents or records as required under regulation 7 is liable fo r a penalty equal to 50% of the amount of royalties payable by the pcrson for the month to which the fa ilure relüt~s. (3) lf no royalties are payabk by the person for a month to whîch the failure rderred to in sub-regulation (2) relates, the penalty is $100,000. (4) A pcrson is li able for a penalty equal to 50% of the royalty shonfoll if that person cloc:s the following - (n) kno,,ingly or recklessly makes a statement to the Collector that is falst or mislc:adi ng in a niatt:rial particular or omi ts from a statement macle to the Collector any malter or thing without wh ich the statement is folse or mislead ing in a nwterial pnnicular: and 4 Seabed Mine rais (Royalties) Regulations 2013 (b) the royalties liability of the person or ofanother person computed on the basis of the slatement is Jess than i: would have been if the statcmcnt lwd not bccn ra lsc or misleud ing (the di!lercnce being rdc:rred to as the --royalty shorcfal I" ), (5) If the: Colkc.:tor lias app licd rc:gulation 5 to a pcrson, the pcr·son is liablc /or a pen.il ty cqual to double the amount of the royalties that \-vmtlcl have becn payable but for the application of regulation 5. (6) A person liable for a penalty umicr this regulation may c1pply in writing to the Collector for remission or the penalty payable and such application m ust include the n~asons for the remission. (7) The Collector rnay, upon application under suh-regulation (5), or on his or her ovm motion. remit, in whole or in parL any penalty payable uncler this rt:gulation by a pe rson. (8) Süb_ject to sub-regulation (7). the liability for penalty arises by operation of this regulation or section 313(5) of the Act and is not dependent on the Collector making an assessment of the penalty due. j r:{z-- /4~67,.,;p ~..<,t;~ Clerk of the Éxecutive Council These regulations are administered by the Office of the S,eabed Commissioner. These regulations were made on the /tJYA day o,f'"}ëœ;r1~2013. 5