Calculating the Mining Tax on Annual Profit
Before calculating an operator's mining tax on annual profit, you must calculate the annual earnings for each of the operator's mines, as well as the operator's annual profit.
As a rule, the annual earnings of an operator's mine for a fiscal year are equal to the gross value of the operator's annual output that is reasonably attributable to the operation of the mine, less the following amounts:
- the amount of expenses that the operator incurred for the fiscal year that is attributable to this portion of the gross value of the operator's annual output;
- the following allowances, that the operator deducts for the fiscal year for the mine:
Adjustments will also have to be made in calculating the annual earnings in the following situations:
- In the fiscal year, the operator alienates, in favour of a person to whom the operator is not related, gemstones that have not been mixed with other gemstones, if the value of the particular gemstones was taken into consideration in the calculation of the gross value of the operator's annual output for a previous fiscal year.
- The valuation method that the operator used to determine the gross value of annual output for the fiscal year is different from the one used for the previous fiscal year (the operator must obtain our authorization to change methods).
The above adjustments increase or reduce the annual earnings.
You can calculate the operator's annual profit once you have calculated the annual earnings for each of the operator's mines. The following amounts can be claimed in calculating an operator's annual profit:
- the amount of expenses incurred by the operator in Canada for scientific research and experimental development with respect to its mining operation;
- the amount of gifts made by the operator (the amount deducted cannot exceed 10% of the total of the annual earnings of the operator's mines);
- the amount of general administrative expenses related to exploration work;
- the amount of the following allowances:
- exploration, mineral deposit evaluation and mine development allowance,
- development allowance,
- exploration allowance,
- pre-production development allowance,
- allowance for community consultations,
- environmental studies allowance,
- sustainable development certification allowance, and
- additional exploration allowance.
The annual profit of an operator other than an eligible operator is calculated taking into account the operator's earnings. The annual profit of an eligible operator must be calculated taking into account both the earnings and the losses from the operator's mines.
The mining tax on annual profit is calculated using progressive tax rates, with each rate applying to a portion of the operator's annual profit as determined on the basis of the operator's profit margin.
The operator's profit margin is calculated by dividing the operator's annual profit by the gross value of the annual output of all of the operator's mines.
The table below shows the tax rate that applies to each portion of the operator's annual profit per profit margin segment.
|Profit margin||Tax rate|
|First segment||0% to 35%||16%|
|Second segment||More than 35%, up to 50%||22%|
|Third segment||More than 50%||28%|