Overview of the 

Canadian Tax Regime

Mining Activities

Canada’s tax regime for mining activities applies to three 
principal stages of a mining operation:

• exploration and development;
• extraction;
• processing (including concentrating, smelting, milling, 

and refining).

The tax regime provides for special treatment of these 
activities, to create and maintain a favourable environment 
for investment in the mineral resource sector. This special 
treatment includes deductions, allowances, and credits that 
may be claimed against the income from the mining operation, 
either in the year of expenditure or, sometimes, in a prior or 
subsequent year.

Different rules may apply to different forms of organization. It 
is therefore important to consider the applicable tax treatment 
before deciding what type of structure will be used for 
investment in a mining project. 

Forms of Organization

Canadian tax law contemplates that mining activities may 
be carried on by an individual, a corporation, a trust, or a 
partnership. Such legislation also provides for the issuance 
of flow-through shares by a corporation, which permit the 
corporation to renounce its deductible resource expenses 
to the purchasers of the shares.

A non-resident individual or corporation may carry on 
business directly in Canada or indirectly through a 
Canadian corporation.

The use of partnerships and joint ventures has recently 
become more common in structuring investments in the 
mining industry. There are two reasons for this development. 
First, new mining projects have become comparatively more 
expensive because these activities often take place in remote 
locations, and investors in these projects wish to share the 
risks. Second, mining has become more international in scope 
as other countries (such as China) look to external sources 
for supplies. As a result, partnerships and joint ventures 

© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms 
affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

6 

|

 A Guide to Canadian Mining Taxation