Net current proceeds tax paid by an
operator accumulates in the operator’s
cumulative tax credit account (CTCA) and
is available to offset the net revenue tax
payable by the operator on revenues from
the mine. An operator cannot carry back
the CTCA balance to offset net revenue
tax paid in prior taxation years, nor can
an operator use the accumulated credits
in the CTCA for one mine to reduce the
revenue tax from other mines.
Net Revenue Tax
Net revenue tax is levied at a rate of
13% on the operator’s net revenue from
a mine for the year, and can be offset
by the operator’s CTCA balance for the
mine at the end of the year. The net
revenue of an operator is the amount
by which the total of:
• the operator’s gross revenue for
the year;
• government grants, subsidies, and
other assistance receivable in the
year; and
• the proceeds from the disposition of
capital assets in the year
exceeds the sum of:
• the operator’s cumulative
expenditure account (CEA) balance
at the end of the previous year;
• the operator’s current operating
costs for the year;
• capital costs incurred in the year,
such as capital assets, exploration
and pre-production discovery costs,
certain pre-production development
costs, equipment leasing costs, and
the cost of inventories;
• the new mine allowance (discussed
below); and
• the investment allowance for the
year (discussed below).
If the expenditures exceed the
revenue receipts at the end of the
taxation year, the operator’s CEA is
increased by the net excess amount.
An operator can carry forward its CEA
account indefinitely and apply the
balance in the account to offset future
revenue receipts.
In computing the allowable expenditures,
the Mineral Tax Act specifically excludes,
among other items:
• interest expense,
• royalties,
• hedging losses,
• head office costs not directly related
to the operation of the mine, and
• costs of incorporation or
reorganization.
New Mine Allowance
To encourage investment and new
mine development in British Columbia,
the new mine allowance permits
an operator to claim an additional
allowance equal to one-third of
the capital cost of a new mine or
an expansion of an existing mine
commencing production in reasonable
commercial quantities after 1994 and
before 2016. As a result, an operator
can offset net revenue by 133% of its
qualifying capital costs.
Investment Allowance
The investment allowance is intended to
provide a return on the capital invested
in the mine by the operator and to
compensate operators for the non-
deductibility of interest. The computation
of the investment allowance for each
particular year of the mine is based on
the average CEA balance for the year
and the prescribed rate.
Alberta
Most mining activities in Alberta are
conducted on land owned by the Crown
in right of Alberta and managed by
the Alberta government. The province
charges and collects royalties from such
mining operations in exchange for the
right to explore for, extract, produce, and
sell minerals found on Crown land.
Unlike most other provinces, Alberta
does not have a separate mining
taxation statute applicable to operators
of mines on freehold land. Revenues
from mining operations are taxed
under the federal and Alberta income
tax regimes, in the same manner as
revenues from other business activities
in the province.
Crown royalties are established by the
Alberta government, with the rates
being based principally on the type of
mineral and the volume of production.
The Alberta government periodically
reviews the royalty regulations to ensure
that the rates remain competitive and
fair. The latest revision to the regime
came into effect on January 1, 2011.
The discussion that follows summarizes
Alberta’s current royalty regime
applicable to various types of minerals
under production on Crown land,
excluding oil and natural gas production.
Metallic and Industrial Minerals
Other than Coal and Oil Sands
The royalty treatment of metallic
minerals is more complex than the
treatment of other minerals.
The rate before payout in respect
of a mine from which the mineral is
recovered is 1% of mine mouth revenue
for the month. After payout, the royalty
rate is equal to the greater of 1% of
© 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.
Provincial Mining Tax
|
49