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Canadian tax rules for mining industry are unique

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Lexit   Monday, 04/02/07 10:13:36 PM
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Canadian tax rules for mining industry are unique

So says the Government of Canada:

"The Canadian tax rules applicable to the mining industry are unique (click here for a general description of federal income tax rules that are specific to mining). Their uniqueness stems from the presence of three significant levels of taxation (see taxes and levies by level of taxation) and from a long-standing recognition of the specific characteristics of mining."


OOCH....Lots and Lots of taxes:

With respect to the mining industry, the Government of Canada imposes:

-corporate income taxes under the Income Tax Act (Part I corporate income tax and Part XIII withholding tax);
-a capital tax (the Large Corporations Tax);
-the GST (Goods and Services Tax), a value-added tax that applies to virtually all goods and services purchased (but GST paid on business input is refunded) and sold (but exported products and services are zero-rated);
-payroll levies (e.g., employment insurance, Canada Pension Plan or Quebec Pension Plan for a business located in Quebec), property taxes, and indirect taxes, such as sales; and
-excise taxes - of limited application to mining, but are levied on selective business inputs such as fuel and diamonds - the tax can either be a specific tax or an ad valorem tax (percentage of value); and
-custom duties.

Provincial and territorial governments have the power to impose direct taxes, such as corporate income and sales taxes.

Provincial and territorial governments impose:

-corporate income taxes in all provinces and territories;
capital taxes in Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia;
-mining and royalty taxes related to the exploitation of natural resources (on their territory as well as offshore);
payroll levies - health and/or post-secondary education taxes (in Manitoba, Ontario, Quebec, Newfoundland and Labrador, Nunavut and the Northwest Territories) and Workers' Compensation in all provinces and territories;
-value-added taxes in Quebec, New Brunswick, Nova Scotia, and Newfoundland and Labrador; and
-excise taxes (particularly on fuel) and sales taxes (Prince Edward Island, Ontario, Manitoba, Saskatchewan and British Columbia).


And Lots and Lots of Tax Legislation:

Federal : http://www.nrcan.gc.ca/miningtax/inv_4a.htm
Quebec: http://www.nrcan.gc.ca/miningtax/qc.htm#h_tax

Low % and High % scenarios are driven by the processing allowance (PA) provisions of the mining tax. PA can shelter from 0% of income from a mine, to as much as 65%, depending on mine profitability.


Worst of all:

"Mining taxes are not deductible for both federal and provincial income tax purposes."



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