environmental trust (QET) provisions 
of the ITA (and some provincial statutes) 
provide a mechanism allowing a taxpayer 
to set aside funds for future reclamation 
obligations and obtain a current 
deduction for the amount set aside. 

The sole purpose of a QET must be 
for funding the reclamation of a site in 
Canada that had been used primarily for, 
or for any combination of:

• the operation of a mine; 
• pipeline abandonment; 
• the extraction of clay, peat, 

sand, shale, or aggregates 
(including dimension stone 
and gravel); or

• the deposit of waste. 

The following is a summary of the 
QET rules:

• A taxpayer is entitled to a deduction for 

an amount contributed to a QET. There 
is no limitation on the amount that a 
taxpayer may contribute to a QET.

• Income earned in the QET is 

taxed at the trust level. However, the 
beneficiary is also required to report 
the income as if it had been earned 
directly, subject to the receipt of a 
refundable credit for tax already paid 
by the trust.

• When funds are withdrawn from 

a QET, the beneficiary is required 
to include amounts received from 
the QET in computing its income. 
However, there should be an 
offsetting deduction for reclamation 
costs actually incurred.

• A vendor is required to include in 

income and a purchaser may to 
deduct any consideration paid by 
the purchaser to the vendor for 
the acquisition by the purchaser 
from the vendor  of an interest as 

a beneficiary under a a QET. Such 
consideration does not include 
consideration that is the assumption 
of a reclamation obligation in respect 
of the trust.

To qualify as a QET, the trust may invest 
only in qualified investments.

Provincial Flow-Through 

Mining Tax Credits

Some provinces also provide 
credits to individuals who invest 
in flow-through shares.

British Columbia

The credit is non-refundable and equal 
to 20% of flow-through mining 
expenditures incurred in British 
Columbia in the year and before 2014. 
Unused tax credits can be carried back 
for 3 years and forward for 10 years. 

Saskatchewan 

The credit is non-refundable and equal 
to 10% of eligible flow-through mining 
expenditures incurred in Saskatchewan 
in the year. Unused tax credits can 
be carried back for 3 years and forward 
for 10 years. 

Manitoba

The credit is non-refundable and 
equal to 30% of flow-through mining 
expenditures incurred in Manitoba in the 
year. Unused tax credits can be carried 
back for 3 years and forward for 10 years. 
The provincial government must approve 
the issuance of the credit. 

Ontario

The credit is refundable and equal to 5% of 
eligible flow-through mining expenditures 
incurred in Ontario in the year. 

Other Provincial Credits 

and Adjustments

British Columbia Mining 

Exploration Tax Credit 

Corporations and active members 
of partnerships conducting mineral 
exploration in British Columbia may 
qualify for the mining exploration 
tax credit (METC). 
The METC is a refundable tax credit equal 
to 20% of qualified mining exploration 
expenses incurred in excess of any 
assistance received. An additional 10% 
credit is available for qualified mineral 
exploration undertaken in prescribed areas 
affected by the mountain pine beetle.
Qualified mining exploration expenses 
include costs incurred before January 1, 
2017 for the purpose of determining the 
existence, location, extent, or quality of 
a mineral resource in British Columbia. 
The credit applies to exploration for all 
base and precious metals, coal, and 
some industrial minerals. 

Québec Resource Tax Credit

A corporation that incurs exploration 
expenses in Québec may be entitled to 
claim a Québec resource tax credit. The 
credit is refundable and varies between 
15% and 38.75% (10% and 28.75% 
after 2013, except if eligible expenses 
incurred before January 1, 2014 are 
reasonably attributable to work carried 
out after December 31, 2013), depending 
on the location of the mine and whether 
the corporation operated a mine. Eligible 
exploration expenses are expenses 
incurred for the purpose of determining 
the existence, location, extent, or quality 
of a mineral resource in Québec. An 
increase in the tax assistance granted by 
the refundable tax credit for resources 
will be available for corporations that wish 

© 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