• royalties or rentals paid to other
parties for ore extracted within the
province; and
• an allowance in lieu of interest equal
to 8% of the undepreciated balance
of depreciable assets.
In addition, a special deduction is
allowed for 150% of each dollar of
eligible exploration expenditures, other
than expenditures claimed as pre-
production development costs, incurred
by the operator. Any such expenditures
that are not claimed in the year can be
carried forward and deducted in any
succeeding year.
A deduction is also allowed equal to
the aggregate of:
• 8% of the original cost of depreciable
assets used in the milling or
concentrating of mineral ore or
mineral products derived from the
mineral ore, and
• 15% of the original cost of depreciable
assets located in New Brunswick and
used in the smelting or refining of
mineral ore or mineral products.
This deduction is subject to a limit of
65% of net profits if it has been claimed
in two or more previous years.
No other deduction is allowed for the
capital cost of property, plant, and
equipment, or for capital investment,
depreciation, or depletion. However,
certain leasing costs in respect of plant
and equipment may be deductible up to
a specified amount.
Taxation of Royalty and Rental
Payments
Payments of royalties or rentals for
ore extracted within New Brunswick
are subject to a 16% tax. The operator
paying the royalties or rentals is required
to withhold and remit the tax payable in
respect of the payment.
Mining Tax Credits
Up to 18% of expenditures incurred
after the commencement of production
in New Brunswick in respect of a 3D
seismic survey, deep drilling, or any
other advanced exploration technology
may be eligible for a credit against the
total mining tax payable (subject to
pre-approval of the expenditure). The tax
credit is limited to $1 million in any given
year. Any portion of the credit that has
not been applied against the total mining
tax payable in the year may be claimed
in any succeeding year.
In addition, a tax credit against net
profit tax is available, equal to 25% of
eligible process research expenditures.
This credit may be granted only after
production commences. Any credit not
fully utilized in a year may be used in
the succeeding year.
Coal Royalty
New Brunswick’s Mining Act imposes
a royalty of $0.16 per tonne of coal
obtained or extracted under the
authority of a mining lease.
Operators of mines that are taxable
under the Metallic Minerals Tax Act are
not subject to the royalty provisions of
the Mining Act.
The government may, at its discretion,
suspend the requirement to pay
royalties under the Mining Act for a
period not exceeding 10 years.
Nova Scotia
Operators of mines in Nova Scotia are
subject to the payment of royalties
(mineral tax) under the province’s
Mineral Resources Act. There is an
additional tax applicable to gypsum
mining (see below). The applicable rate
is one of the following:
• the greater of:
– 2% of the operator’s net revenue
and
– 15% of the total net income for
the year;
or
• upon written notice from the Mine
Assessor where the operator’s gross
income for the year is less than
a prescribed amount, 2% of the
estimated net revenue for the year;
or
• a rate determined at the discretion
of the government.
Royalties are payable in advance in
quarterly instalments, with any balance
payable on the due date for filing the
annual tax return or within three months
of the end of the operator’s fiscal year,
whichever is earlier.
One component of the calculation of
tax is the net revenue of the operator.
Net revenue for a fiscal year is the
gross income derived from output less
deductible expenditures. Gross income
is calculated using the market price
of the mine output either at the time
of sale or at the time of shipment, in
situations where the output is sold,
or otherwise at the time of transfer or
consumption of the output. Deductible
expenditures include costs of:
• marketing,
• shipping,
• smelting and refining, and
• packaging,
and other associated and related costs
borne by the operator.
No deduction is allowed for (among
other items):
• the cost of plant, machinery,
equipment, or buildings;
• interest or other financing costs;
• depletion of property;
• the acquisition cost of a mineral
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A Guide to Canadian Mining Taxation