property;

• royalties payable under the Mineral 

Resources Act;

• taxes on profits;
• lease payments; or
• direct costs incurred by the operator 

in respect of the processing 
of output derived from mining 
operations outside the province or 
operations not controlled by the 
operator.

The other component of the tax is the 
net income of the operator. Net income 
is determined by deducting from the 
amount of net revenue (as calculated 
above) the reasonable operating 
expenses of the operation borne by 
the operator. Reasonable operating 
expenses include the following costs 
and allowances:

• a depreciation allowance 

(discussed below),

• a processing allowance 

(discussed below),

• reclamation costs,
• processing costs,
• underground and aboveground 

operating expenses,

• insurance,
• utilities,
• fuel,
• security, and
• maintenance and repairs.

Depreciation Allowance

An allowance is provided for the 
undepreciated value of depreciable 
assets, to a maximum of 100% of 
depreciable costs per year for the first 
three years of a mining operation and a 
maximum of 30% of the undepreciated 
value at the end of each year thereafter. 
Depreciable assets include the costs of 

the mine, mill, plant, and equipment, 
as well as exploration and development 
expenses.

Processing Allowance

The processing allowance provides 
a return on capital employed in 
the secondary crushing, grinding, 
concentrating, chemical extraction, 
smelting, refining, or packaging of output 
in Nova Scotia. The allowance is equal 
to 8% of the cost of the processing 
assets plus 25% of assets necessary 
to the servicing and management of 
the processing activities. The allowance 
cannot exceed 65% of net income 
otherwise determined.

Reclamation

The costs of reclamation completed 
after a mining operation has ceased 
production may be considered as prior 
years’ operating expenses. As such, 
these costs may be applied in reverse 
order to royalty returns for prior fiscal 
years and can be used to reduce 
royalties payable in prior years. The 
reduction cannot exceed 2% of net 
revenue for each fiscal year in which  
it is applied.

Gypsum Mining Income Tax

Profits from gypsum mining are subject 
to tax at a rate of 33 1/3%. A taxpayer 
may either pay this tax on its actual 
profits from gypsum mining, or elect 
to assume a legislated profit per ton of 
gypsum mined. A taxpayer’s profits from 
gypsum mining are its net revenues 
from mining gypsum less:

• the actual working expense of the 

mine, including salaries and wages of 
employees immediately connected 
to the gypsum mining;

• the cost of power and lighting;

• the cost of food and provisions 

supplied by the employer;

• the cost of explosives;
• the costs incurred in providing mine 

safety and security;

• the costs of insuring mine physical 

assets;

• depreciation of mine assets;
• exploration and development costs;
• municipal taxes upon the mine; and
• charitable donations in Nova Scotia.

The Gypsum Mining Income Tax Act 
expressly disallows deductions for 
investments in capital assets. Income is 
computed annually for the operations at 
each mine, and losses cannot be carried 
forward or back.

Prince Edward Island

Prince Edward Island does not impose 
mining tax.

Newfoundland and 

Labrador

The Revenue Administration Act 
imposes the following taxes (collectively, 
mineral tax) on operators of mines in 
Newfoundland and Labrador: 

• a 15% tax on taxable income,
• a 20% tax on amounts taxable, and
• a 20% mineral rights tax.

Tax on Taxable Income

Taxable income of the operator is 
calculated as net income less the 
greater of 20% of the net income, if 
positive, and amounts paid to a person 
who receives royalties subject to the 
mineral rights tax. The applicable tax rate 
in 2013 is 15%.

Net income is the gross revenue 
of the taxpayer less all expenses 

© 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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