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Finance to ease eligible deductions for mining taxes

Finance to ease eligible deductions for mining taxes

Finance recommends easing eligible deductions for mining taxes

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In a recent comfort letter, Finance states it will recommend amending the Act and the Income Tax Regulations (Regulations) to allow a current year deduction for certain previously excluded provincial or territorial mining taxes. This relief would affect taxpayers paying mining taxes in a current year on income from mining operations carried on during a previous taxation year that has been barred from reassessment under the Act.

Finance says it will recommend that the deduction be equal to the amount that would otherwise have been allowed for the taxation year in which the relevant mining operations were carried on, had it not been a statute-barred taxation year. Finance says it will recommend that the amendment be retroactive for taxation years ending after 2007.

This is welcome relief for taxpayers carrying on mining operations who may be reassessed for additional provincial or territorial mining taxes several years after the taxation year in which the relevant mining operations took place. In such circumstances, the CRA may be unable to reassess the taxation year to allow a corresponding deduction in computing business or property income for federal income tax purposes if the year is statute-barred.

Legislative background

Taxes are often levied by a province or territory on a taxpayer's income from mining operations (known as mining taxes). In a particular taxation year, taxpayers are entitled to a deduction for mining taxes incurred on income for the year regarding certain mining operations (e.g., mineral production, mineral processing, etc.), under paragraph 20(1)(v) of the Act and subsection 3900(2) of the Regulations.

Under the current rules, where a taxpayer has filed its federal income tax return for a particular taxation year and is subsequently assessed or reassessed by a province or territory for additional mining taxes in respect of that year, then the taxpayer must amend its tax return to claim a deduction for any additional mining taxes paid. If the particular year in which the relevant mining operations were carried on (and additional mining taxes were incurred) is barred from reassessment under the Act, the CRA cannot reassess the taxpayer to allow a deduction for these additional mining taxes.

For more information, contact your KPMG advisor.

Information is current to December 10, 2019. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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