Income Taxation (federal and Nunavut)


Download 535 b.
Sana04.06.2018
Hajmi535 b.



Income Taxation (federal and Nunavut)

  • Income Taxation (federal and Nunavut)

  • Nunavut Mining Royalty

  • Flow-Through Shares

  • Mining in the Far North



Importance: taxation affects a mining project’s economic viability, and so must be factored into a go/no go decision

  • Importance: taxation affects a mining project’s economic viability, and so must be factored into a go/no go decision

  • Stability: since mining projects are long-term undertakings requiring long-term planning, a stable, predictable tax regime is a big plus

  • Fairness: businesses hate paying taxes when they aren’t making money, so, (1) profit–based taxes are perceived as fairer than revenue–based taxes, and (2) businesses want to recover their costs before paying taxes





federal and territorial corporate income taxes are computed as a % of taxable income (profits minus permitted deductions)

  • federal and territorial corporate income taxes are computed as a % of taxable income (profits minus permitted deductions)

  • federal rate of tax = 15%

  • Nunavut rate of tax = 12%

  • both taxes are administered by the federal government (Canada Revenue Agency)



Significant deductions from “profit” in computing taxable income:

  • Significant deductions from “profit” in computing taxable income:

  • interest expense on debt

  • “Canadian exploration expense” (CEE):

  • costs incurred in (1) determining existence, quality or quantity

  • of a mineral resource, or (2) bringing a mine into production (if

  • incurred before the mine is producing in commercial quantities)

  • - 100% deductible



“Canadian development expense” (CDE):

  • “Canadian development expense” (CDE):

  • cost of acquiring a Canadian resource property, and post-

  • production costs of mine shafts and similar underground work

  • - 30% deductible per year

  • “Capital cost allowance” (CCA):

  • cost of buildings, structures, machinery and equipment for a

  • mine; social services assets, power generation equipment,

  • railway track and equipment

  • - deductible at 25% per year; 100% deductible in some

  • circumstances





Producing mines are subject to an annual royalty based on the value of the mine’s output, under the Northwest Territories and Nunavut Mining Regulations (C.R.C., c.1516)

  • Producing mines are subject to an annual royalty based on the value of the mine’s output, under the Northwest Territories and Nunavut Mining Regulations (C.R.C., c.1516)

  • royalty is a % of mine’s annual profit

  • computed based on value of mine output (sales and inventory value changes) less permissible deductions

  • intended to measure profit at the mine mouth



Mining royalty on Crown lands is administered by the federal government, which keeps the money

  • Mining royalty on Crown lands is administered by the federal government, which keeps the money

  • Permissible deductions similar to those for income tax, but interest expense is not deductible, nor are royalties or costs for offices off the mine site

  • Royalty rate applicable to annual profit from a mine on Crown lands is the lesser of

  • 13% of total profit; and

  • the graduated rates in the following table:







Flow-through shares (which are unique to the natural resources industry) are a financing tool intended to create incentives for exploration and development.

  • Flow-through shares (which are unique to the natural resources industry) are a financing tool intended to create incentives for exploration and development.

  • mining companies conducting exploration and development activities are incurring tax-deductible expenses (CEE and CDE), which they often can’t use (no taxable income)

  • they also need to raise money in order to finance their exploration and development activities

  • FTS allow an investor who purchases new common shares from the mining company to deduct for income tax purposes CEE or CDE that the mining company incurs, transferring the tax deduction to the investor, and allowing the mining company to get a higher price for its shares

  • for “grassroots” exploration CEE, the investor may also claim a 15% investment tax credit







Payroll Tax: applicable to employees who work in Nunavut

  • Payroll Tax: applicable to employees who work in Nunavut

  • 2% of remuneration (including most non-cash remuneration)

  • collected at source by employers, who are required to register

  • N/A to employees normally working outside Nunavut who earn < $5,000 in Nunavut during the year

  • for employees paying Nunavut income tax, effectively payroll tax on the first $60,000 of income is credited back



Fuel Tax: applicable to fuel consumed in Nunavut

  • Fuel Tax: applicable to fuel consumed in Nunavut

  • tax must be paid even when fuel purchased elsewhere and imported into Nunavut for sale or consumption there

  • fuel tax rebate offered for fuel consumed in unlicensed machinery and used directly in mining exploration

  • rebate also offered to Nunavut-registered companies for fuel consumed in unlicensed machinery and equipment used directly in mine development, mineral extraction or reclamation, if the company enters into and complies with a Development Partnership Agreement with the Government of Nunavut

  • in both cases, fuel must have been purchased in Nunavut or imported in accordance with statute



Mining in the Far North involves greater challenges than elsewhere in Canada

  • Mining in the Far North involves greater challenges than elsewhere in Canada

  • vast distances

  • lack of infrastructure

  • inhospitable climate

  • high living costs

  • Mining companies looking for economically viable mineral resources and then seeking to bring them into production perform some functions carried out by government in other regions



The 2013 federal budget included changes that will increase the tax burden on the mining industry

  • The 2013 federal budget included changes that will increase the tax burden on the mining industry

  • accelerated CCA (100% deduction) is being removed for the mining industry, starting in 2017

  • pre-production mine development expenditures are being moved from CEE (100% deduction) to CDE (30%/year deduction), starting in 2015

  • The 2012 federal budget eliminated the 10% investment tax credit for pre-production mining expenditures



What can the taxation system do to encourage mining in Canada’s Far North?

  • What can the taxation system do to encourage mining in Canada’s Far North?

  • a targeted tax credit for exploration carried out in the Far North

  • make the 15% FTS investor tax credit for grassroots exploration CEE permanent

  • make all costs associated with community consultation and environmental regulation 100% deductible

  • provide for accelerated CCA for mining in the Far North



  • Thank you

  • For more on the Canadian taxation of mining, go to www.miningtaxcanada.com

  • Steve Suarez

  • Borden, Ladner Gervais LLP (Toronto)

  • 416 367-6702

  • ssuarez@blg.com




Download 535 b.

Do'stlaringiz bilan baham:




Ma'lumotlar bazasi mualliflik huquqi bilan himoyalangan ©fayllar.org 2020
ma'muriyatiga murojaat qiling