Pre-Production Development Allowance
Operators can deduct the pre-production development allowance in respect of expenses incurred after March 30, 2010, in calculating their annual profit for a fiscal year.
The maximum amount that an operator can deduct as a pre-production development allowance for a fiscal year is equal to the balance of cumulative pre-production development expenses at the end of the year.
In general, the balance of cumulative pre-production development expenses at the end of a fiscal year includes any expenses incurred after March 30, 2010, other than those that the operator renounced under the Québec or Canadian flow-through share regime, minus the amounts that the operator deducted as a pre-production development allowance in calculating the annual profit for previous fiscal years.
Pre-production development expenses are expenses that were incurred to bring a new mine into production in reasonable commercial quantities, including expenses incurred in:
- removing overburden;
- sinking a mine shaft;
- constructing an adit or other underground entry.