The ITA and the provincial statutes provide a number of 
deductions, allowances, and credits that are specifically 
available to taxpayers engaged in qualifying mining activities. 
These provisions apply over and above the standard 
deductions, allowances, and credits available to individuals 
and entities that are subject to tax on income earned from a 
business or property.

The mining provisions described below are designed to 
encourage and support the exploitation of oil, gas, and mineral 
resources, by recognizing certain business challenges that are 
unique to this industry. A particular aspect of this planning – 
the tax-efficient structuring of mining investments – is 
discussed in a separate section of this book.

Canadian Exploration Expenses

The ITA provides a deduction for Canadian exploration 
expenses (CEE) incurred during the exploration and 
development stage of the mining life cycle. These costs can 
currently be separated into two categories:

•

Grassroots exploration:

 This category includes costs 

incurred for the purpose of determining the existence, 
location, extent, or quality of an oil, gas, or mineral 
resource in Canada. These costs do not include expenses 

related to a mine that has come into commercial 
production or expenses that are a Canadian development 
expense (CDE) (described below). 

•

Mine development: 

This category currently includes costs 

incurred for the purpose of bringing a new mine in Canada 
into production “in reasonable commercial quantities.” 
These costs must be incurred before the new mine 
reaches a commercial level of production. 

The second category is being phased out. After 2017, all mine 
development costs will be treated as CDE. 

Transitional rules provide that expenses incurred before 2017 
may be grandfathered as CEE if they are incurred:

• under an agreement entered into before March 21, 

2013; or 

• as part of the development of a new mine.

In order to satisfy the second criterion: 

• the construction of the new mine must have been started 

by March 21, 2013; or

• the engineering and design work for the construction 

of the new mine must have been started before 
March 21, 2013.

Deductions, Allowances, and Credits

© 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.

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 A Guide to Canadian Mining Taxation