APPLICABLE TAX REGULATIONS

The Girardin Act

The Vale Inco Nouvelle-Calédonie project benefits from tax exemptions under the French “Girardin Act”.
The purpose of this law is to assist the financing of projects undertaken in French overseas territories, regions and departments (New Caledonia has the unique status of an overseas region), on the condition that certain criteria are met.  Essentially, the law aims to attract investments which are likely to support sustainable economic development. Investments therefore have to be either in selected industrial sectors (aquaculture, tourism, renewable energy sources) or of importance for the development of New Caledonia.

Assistance granted to the Vale Inco Nouvelle-Calédonie project

As a major project, Vale Inco Nouvelle-Calédonie meets the criteria in terms of importance for the same reasons as the northern factory project. Furthermore, the French government has taken into account Vale Inco Nouvelle-Calédonie’s respect for the environmental laws which apply to New Caledonia when granting assistance.

The total assistance granted is generally based on a certain number of assets (eligible assets). In Vale Inco Nouvelle-Calédonie's case, these assets include units of buildings and equipment for part of the production plant. Vale Inco Nouvelle-Calédonie's overall eligible assets are worth the sum of almost 50 billion CFP (475 million US dollars). With the overall total of the project worth almost 200 billion CFP (1.9 billion US dollars), tax exemption therefore applies to one quarter of the total cost. The savings achieved by this come to approximately one third of total eligible assets, that is, an exemption worth approximately 12 billion CFP (100.5 million US dollars), which has been granted by the French government.

How it works

French investors who are looking to make tax savings acquire eligible assets through an economic interest group.  This economic interest group will, after the factory has become operational, hire its assets to Vale Inco Nouvelle-Calédonie for at least five years (12 years maximum).  Vale Inco Nouvelle-Calédonie will then acquire these assets for an amount equivalent to the remaining capital less hire payments.  The investors benefit from attractive tax deductions in France which enable them to deduct for tax purposes the value of their advances to the economic interest group.

The advantages for Vale Inco Nouvelle-Calédonie

These tax breaks have a favourable effect on Vale Inco Nouvelle-Calédonie (reduced payments) and make up the 12 billion CFP reduction in the cost of investment described above. This tax exemption scheme and its associated benefits are necessary to make the project financially viable to shareholders. It should also be noted that the French government has agreed to similar tax exemption arrangements for the extension of the SLN’s factory at Doniambo and New Caledonia’s northern factory project.

 

The advantages for New Caledonia

This act aims to attract major projects which will promote sustainable economic development in New Caledonia. New Caledonia does not suffer any losses of tax revenues under the Girardin Act.

The tax exemption regime

Under a law of the country, the government of New Caledonia has granted a full tax exemption to metallurgy projects during the first 15 years of operation and a 50 % tax reduction during the 5 years after that.

The regime

Under this tax regime, New Caledonia grants a tax exemption to overseas investors undertaking metallurgy projects which will help the country's economic development.  Both Vale Inco Nouvelle-Calédonie and the Koniambo project in the north benefit from this arrangement.

For 10 to 15 years, these projects will be 100% exempt from some taxes and then 50% exempt for the next 3 to 5 years.  Vale Inco Nouvelle-Calédonie has qualified for a term of 15+5 years on the condition that a minimum of 50 billion CFP are invested and at least 500 jobs are created. 

However, if a project achieves a level of profitability above the threshold which has been fixed by the government of New Caledonia, exemption arrangements will be automatically annulled from the beginning of the next financial year even if the exemption period has not yet passed.  After this period the project becomes subject to tax arrangements under common law and must pay taxes if it generates profits.

Taxes payable by Vale Inco Nouvelle-Calédonie

According to current estimates, Vale Inco Nouvelle-Calédonie will pay back 20 to 30 billion CFP to the country in the form of various taxes during the 20 year exemption period.  A number of taxes are not exempt, including IRVM (withholding tax on securities income), export duty and the tax on some consumables during the mining period.  Vale Inco Nouvelle-Calédonie will also pay additional sums to the neighbouring communes of Yaté and Mont Dore.