reasonably incurred in mining 
operations, processing, and smelting. 
Gross revenue is the revenue from the 
sale of minerals as a result of mining 
operations in a year, including:

• income from processing, 
• gains or losses resulting from the 

fixing of a price for output of a mine 
before delivery, 

• gains or losses from hedging 

transactions related directly to 
the proceeds of the output of a 
mine, and 

• government assistance related to 

revenue. 

Deductible expenses include:

• unamortized pre-production 

expenditures over the estimated 
remaining life of the mine;

• rentals, royalties, charges, and other 

payments to the Crown for the right 
to engage in mining operations; and

• any undeducted exploration 

expenditures exclusively incurred 
by the taxpayer anywhere in 
Newfoundland and Labrador before 
the commencement of commercial 
production.

Operators can also claim allowances for 
depreciation and processing.

Depreciation Allowance

Depreciation may be claimed on 
vehicles, machinery, plant, equipment, 
buildings, and other assets of a capital 
nature used in mining operations 
and in processing and smelting. The 
depreciation on processing or smelting 
assets (Class 1 assets) and mining 
assets that are not Class 3 assets (Class 
2 assets) cannot exceed 25% of the 
UCC. The depreciation on mining assets 
acquired for and used in a new mining 
operation or a major expansion project 
(Class 3 assets) can be up to 100% 
of the UCC. Only 50% of the assets 

may be included in the UCC in the 
year of acquisition for the purposes of 
calculating depreciation. The deduction 
is prorated for short taxation years. 
Where a mining operation ceases to 
be a new mining operation, or a major 
expansion project, the Class 3 assets 
are reclassified as Class 2 assets. 

Processing Allowance

An operator may deduct a prescribed 
amount by way of return on capital directly 
and necessarily employed by the taxpayer 
in processing. In addition, an operator 
may deduct a processing allowance, equal 
to 8% of the original cost of processing 
assets and 15% of the original cost 
of smelting assets, both of which are 
permanently located in Newfoundland 
and Labrador, and exclusive of interest 
or financing charges. The processing 
allowance cannot exceed 65% of net 
income excluding this deduction. 

Credit Against Tax on 

Taxable Income

A credit is available against the 15% tax 
on taxable income for a year. The credit 
is based on the corporate income tax 
paid to Newfoundland and Labrador 
in the year and serves as a deduction 
against the tax on taxable income.

The credit applies for 10 consecutive 
years beginning in the year in which 
commercial production is achieved in 
the mine from which the mining income 
is derived. The cumulative amount of 
the credit cannot exceed $20 million. 
The credit can be claimed only if all 
depreciation and exploration expenses 
available in the year have been utilized 
by the operator. 

The amount of the credit in respect 
of corporate income tax for a year is 
the lesser of $2 million and corporate 
income tax payable under the provincial 
Income Tax Act for the year in respect of 
mining operations.

Tax on Amounts Taxable

A 20% tax applies to amounts taxable, 
which are calculated as 20% of the 
net income (as determined above), 
if positive, minus amounts paid to a 
person who receives royalties subject to 
the mineral rights tax. 

Mineral Rights Tax

Mineral rights tax applies where a 
person receives consideration, including 
rent and royalties, that is contingent 
upon production of a mine, or computed 
by reference to the production from a 
mine, for the grant or assignment of any 
right issued under the Mineral Act.
The annual tax is 20% of the net 
revenue received in the year in excess 
of $200,000. Where the consideration 
received is from an operator and the 
net revenue of the person in that year is 
$100,000 or less, no mineral rights tax 
is payable. Where net revenue in a year 
is greater than $100,000 and less than 
$200,000, the tax payable is 40% of net 
revenue in excess of $100,000. 
Net revenue is the total value of mineral 
production royalties received less the 
total of legal expenses incurred by the 
person in the collection of the revenue, 
exploration expenditures incurred by the 
person, and royalties paid by the person 
to another person, where that other 
person is subject to mineral rights tax in 
respect of the royalty paid.
The operator paying the royalties or 
rentals is required to withhold and remit 
the tax from the payment. 

Yukon

Yukon imposes three separate royalties:
• a royalty on all ore and minerals 

mined (the mining royalty),

• a royalty on all gold exported from 

Yukon (the gold royalty), and

• a royalty on coal (the coal royalty).

© 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.

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 A Guide to Canadian Mining Taxation