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
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Provincial Mining Tax
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