The profit tax is also affected by the 
base number of tonnes of production 
for each producing mine, adjusted for a 
“common industry adjustment factor”. 
This factor is based on the industry as 
a whole determined by the government 
of Saskatchewan. In the past the 
adjustment has been small, since there 
have been no new mines or significant 
expansions in Saskatchewan for many 
years. However, there are currently 
a number of proposed new mines 
and expansions that may affect the 
production of the industry. While this 
increased production may in turn affect 
the common industry adjustment factor, 
it is difficult to predict the impact this 
may have on the taxes levied.
The profit tax payable for the taxation 
year is reduced to the extent that 
the producer has paid any applicable 
resource surcharges, royalties, and 
base payments.
The profit tax is also reduced by 
the following provincial allowances, 
deductions, and credits:
• Corporate allowance: There is a 

deduction of 2% of gross revenue, 
in lieu of non-deductible corporate 
administrative, overhead, financial, 
and general management expenses.

• Corporate office incentive: There 

is a deduction of $25,000 for each 
existing corporate office position in 
Saskatchewan and a deduction of 
$100,000 for each new corporate 
office position in Saskatchewan for 
the first five years.

• Depreciation allowance: There is a 

deduction of 120% of the cost of 
new capital expenditures in excess of 
historic thresholds.

• Loss carryforward: Losses may be 

carried forward against future profits 
for up to five years.

• Targeted tax credit: Producers that 

participate in approved market 
development or R&D programs may 
claim a tax credit of 40% of the 
approved expenditure.

• A Saskatchewan resource credit (SRC): 

A credit may be deducted against the 
profit tax based on 0.75% of gross 
revenues used in the calculation of 
the basic royalty. The SRC is meant to 
partially offset the resource surcharge 
levied under the Corporation Capital 
Tax Act.

Uranium

 

Amendments to Saskatchewan’s royalty 
regime applicable to producers in the 
uranium industry were implemented on 
April 1, 2013 with retroactive effect from 
January 1, 2013.

The new uranium royalty regime has 
three components:

• A basic royalty: Producers pay a basic 

royalty based on 5% of gross sales 
(as under the old system).

• A tiered royalty: In addition, 

producers are subject to a tiered 
royalty with two rates based on the 
profit earned per kilogram:
– 10% of net profit up to $22 per kg;
– 15% of net profit over $22 per kg. 

• SRC: As described above in respect 

of the potash industry, a credit may 
be deducted against the basic and 
tiered royalties, based on 0.75% 
of gross revenues used in the 
calculation of the basic royalty. The 
SRC is meant to partially offset the 
resource surcharge levied under the 
Corporation Capital Tax Act.

Net profit will be based on sales 
revenues less operating costs, 
exploration costs, and the full dollar 
value of capital costs. Regulations 

will provide detail on the costs to be 
included in determining the net profits.
Transitional rules will be implemented 
for projects under construction.

Coal

 

Royalty charges for the coal industry are 
imposed under the Mineral Taxation Act, 
1983. The applicable rates are as follows:
• for Crown coal, 15% of the fair market 

mine mouth value of the coal, and

• for freehold coal, 7% of the fair market 

mine mouth value of the coal.

Fair market mine mouth value is the gross 
sale price of the coal less the transportation 
costs to the point of sale less other 
approved costs, such as loading facilities.
Fair market mine mouth value is the 
sales contract value to arm’s-length 
parties. If the coal is not sold to an 
arm’s-length party or if the coal is for 
consumption, Saskatchewan Energy and 
Resources will set fair market value as 
an average price of all Saskatchewan 
coal sold under contract to arm’s-length 
parties during the reporting period. 
A resource credit may be claimed equal 
to 0.75% of sales to partially offset the 
resource surcharge described above.

Diamonds

Because Saskatchewan’s diamond 
industry is still in its infancy, there are 
no legislated tax provisions particular to 
diamond mining operations. 
However, the published proposals are 
as follows:
• a 1% royalty based on the value of 

mine production;

• an initial five-year royalty tax holiday;
• a stepped royalty rate on profits to 

a maximum of 10% after capital 
investment is fully recovered; and

© 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