from 36 months to 120 months up to 
the $10 million maximum profit level. 
After expiry of the exemption period, the 
applicable mining tax rate for a remote 
mine is 5%.

Diamond Mining Tax

Operators of diamond mines in Ontario 
are subject to tax under the Ontario 
Mining Act, not the Mining Tax Act. 
However, the method of calculating the 
tax is fundamentally the same under 
both statutes. 

The annual tax is the lesser of: 

• 13% of the net value of output for 

the fiscal year and 

• the amount of tax calculated at 

graduated rates applied to the net 
value of the output.

The first $10,000 of net value is taxed at 
a zero rate, and graduated rates ranging 
from 5% to 13% apply to the net 
value of output between $10,000 and 
$45 million. The net value of output over 
$45 million is subject to a rate of 14%.

The net value of output for a fiscal 
year is the proceeds from the sale 
of diamonds (excluding gains and 
losses from hedging transactions), 
less allowable costs, expenses, and 
allowances. The latter include:

• differences between the market 

value of the inventory of diamonds 
on hand at the beginning and end of 
the year;

• costs of cleaning, sorting, valuing, 

marketing, and selling diamonds;

• costs of mining and processing;
• repairs and maintenance costs; and
• general and indirect costs for 

property, employees, and operations. 

The Mining Act lists excluded 
expenditures that are similar to those 
listed for mining operators subject to the 
Mining Tax Act, as described above.

Québec

Québec levies mining taxes under the 
Mining Tax Act (Québec) at a flat rate 
of 16% on the annual profits from a 
mine. The calculation of the annual 
profit is on a mine-by-mine basis, so 
that the revenues from one mine 
cannot be offset by the losses from 
another. However, exceptions apply 
for eligible operators that satisfy the 
following conditions:
• the operator produces no mineral 

substance in reasonable commercial 
quantities at the end of the fiscal 
year; and

• during the fiscal year, the operator 

is not associated, for the purposes 
of the Taxation Act (Québec), with 
another entity that produces a 
mineral substance in reasonable 
commercial quantities.

A corporation in Québec will be subject 
to mining taxes on the annual profit 
earned on its property that is reasonably 
attributable to the mine and that can 
reasonably be attributable to the 
operations of the mine.
For the purposes of the Mining Tax 
Act, annual profit is determined by 
subtracting from gross revenue the 
operating expenses and allowances 
directly related to the mine, including:
• exploration and development expenses;
• depreciation;
• a processing allowance; and
• an additional allowance for a mine 

located in the North or mid-North, 
described below.

No deduction is allowed for:

• any amount paid to a community or 

a municipality for the benefit of that 
community or municipality;

• an expense incurred for constitution, 

organization, or reorganization;

• a capital loss, a payment of capital, 

or a depreciation, obsolescence, 
or depletion allowance, except 
to the extent permitted by the 
Mining Tax Act;

• a royalty paid or payable in respect 

of output;

• a premium in respect of an 

insurance contract, except where 
the insurance contract pertains to 
property regularly used in the mining 
operation or to a person, other than 
an executive or director, who is an 
employee of the operator and whose 
duties relate to the mining operation;

• costs of financing;
• an amount paid or payable under the 

Mining Tax Act;

• taxes on profits and on capital; 
• income tax under a federal, 

provincial, or foreign law, and 
professional fees incurred in respect 
of an objection or an appeal in 
respect of an assessment provided 
for in any such law;

• a reserve or provision other 

than a reserve or provision 
prescribed by regulation of the 
government; or

• a loss resulting from a hedging or 

a speculative transaction.

A loss for the year cannot be carried 
forward or back.

© 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 

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