Exploration and Development 

Expenses

Exploration and development expenses 
are divided into three separate cumulative 
accounts, each giving rise to a separate 
allowance:

• Exploration expenses incurred to 

determine the existence of a mineral 
substance in Québec, to locate such 
substance, or to determine its extent 
or quality: Eligible operators can 
deduct 100% of the costs (125% 
in the case of mines located in 
the North or mid-North, described 
below). Other operators can claim 
the lesser of the total of such 
expenses and 10% of the annual 
profit before the deduction of those 
expenses and any pre-production 
allowance.

• Expenses incurred to bring a new 

mine into production where those 
expenses are incurred before 
production in reasonable commercial 
quantities commences: Operators 
can deduct up to 100% of such 
expenses from the annual profit from 
the mine.

• Expenses incurred to bring a 

new mine into production where 
those expenses are incurred after 
production in reasonable commercial 
quantities commences: Operators 
can deduct 30% of such expenses 
from the annual profit from the mine 
(but the deduction cannot exceed 
the annual profit calculated before 
the deduction and the processing 
allowance).

Depreciation Allowance

Operators can depreciate assets 
acquired between May 12, 1994 and 
March 31, 2010 at a rate of 100%, and 
assets acquired after the latter date at 
a rate of 30%.

Processing Allowance

The processing allowance, unlike the 
tax depreciation on capital assets, is a 
perpetual allowance based on the cost 
of the property acquired and used to 
process ore. When an operator does 
smelting or refining (other than for gold 
and silver), it is entitled to claim, as 
a processing allowance, a deduction 
equal to 13% of the cost of the eligible 
property. Otherwise, the deduction is 
equal to 7% of the cost of the eligible 
property. However, the processing 
allowance may not exceed 55% of the 
annual profit calculated prior to the 
additional allowance for a mine located 
in the North or mid-North.

Additional Allowance for a Mine 

Located in Northern Québec

A mining corporation may claim, over a 
36-month period, an additional allowance 
of $2 million for a mine located in the 
mid-North and $5 million for a mine 
located in the North. Mid-North means 
the territory between 50º30’N latitude 
and 55ºN latitude, limited to the east 
by the Grenville Front, and the part of 
the territory of the Côte-Nord located 
between 59ºW longitude and 66ºW 
longitude. North means the territory 
located north of 55ºN latitude.

Refundable Credit for Losses 

In some circumstances, a refundable 
tax credit is provided under the Mining 
Tax Act to an operator that sustains an 
annual loss from a particular mine. 
The tax credit is calculated as 16% of 
the lesser of:
• the adjusted annual loss; 
and

• the total of:

– pre-production mineral deposit 

evaluation and mine development 

expenses incurred in the fiscal 
year, not exceeding the amount 
deducted for that year in respect 
of such expenses,

plus
– 50% of the exploration expenses 

incurred by an eligible operator.

Under the Mining Tax Act, the tax 
credit is not included in income 
and does not reduce any amounts 
otherwise deductible. For income tax 
purposes, under both the ITA and the 
Taxation Act (Québec), the credit is 
not taxable.

Value of Precious Stones

In determining the net revenue of a 
mine, the gross value of precious stones 
is based on their value before cutting 
or polishing. The determination of the 
gross value of precious stones must 
also be made at the mine site by the 
operator and an appraiser mandated by 
the Minister of Natural Resources and 
Wildlife. The operator must sort and 
clean the precious stones to facilitate 
their evaluation.

Proposed Amendments to the 

Mining Tax Act

On May 6, 2013, the government of 
Québec proposed substantial changes to 
the Mining Tax Act. These amendments 
are to apply to fiscal years beginning 
after December 31, 2013.

The mining duties that an operator 
will be required to pay for a fiscal year 
starting after December 31, 2013 will 
be the greater of:

• the operator’s minimum mining tax 

for the fiscal year; 

and

• the operator’s mining tax on annual 

profit for the fiscal year.

© 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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