Canada: Significant Mining Sector Tax Measures In 2013 Federal Budget

Last Updated: April 8 2013
Article by Steve Suarez

Most Read Contributor in Canada, September 2016

The Canadian federal government released its 2013 budget (the Budget) on March 21, 2013 (Budget Day). Included in the Budget were a number of tax measures of relevance to the mining community, in particular with reference to the tax treatment of expenditures made by mining companies.


Expenditures on certain kinds of capital property ("depreciable property") such as buildings and equipment are the subject of "capital cost allowance" (CCA), the tax version of the accounting concept of depreciation. Each year, the taxpayer is entitled to take as a deduction in computing income a percentage of the remaining expenditure balance in the relevant class of property (the "undepreciated capital cost", or "UCC" of that class). Different classes of property have different depreciation rates. The result is that the cost of the property is deducted from income for tax purposes over a period of years.

The applicable CCA rate for most mining depreciable property is generally 25%. However, in certain circumstances the taxpayer is entitled to claim a deduction of up to 100% of the UCC of certain depreciable properties (not exceeding income from the project for the year). In very general terms, this 100% rate applies where the property was acquired before the mine came into production or as part of a significant expansion of a mine. This accelerated CCA is meant to offset some of the risk of investing in new mines, by effectively deferring taxation of mine income until the cost of its capital assets has been recovered out of project earnings.1

The Budget announced the phase-out of accelerated CCA for the mining sector, occurring over the period 2017 - 2021. Property acquired before Budget Day is not affected. The existing additional allowance will also apply to property acquired before 2018:

  • pursuant to a written agreement to acquire the property entered into before Budget Day; or
  • as part of a mine development or expansion where either construction was started, or engineering and design work for construction had commenced (as evidenced in writing), before Budget Day.2

The elimination of this important incentive is disappointing, particularly in what constitutes a challenging time for the mining industry. Affected taxpayers should review their projects and consider opportunities to maximize the use of accelerated CCA for the remaining period in which it is available.


Many expenditures made by mining companies that are not on depreciable property for tax purposes fall into one of two categories of expenditures unique to the natural resource industry: "Canadian exploration expense" (CEE) or "Canadian development expense" (CDE). Essentially, CEE amounts can be 100%-deducted in the year they are incurred, while CDE amounts are deducted at the rate of 30% per year on a declining balance basis.3

CEE encompasses two types of expenditures: those on exploration with respect to a mineral resource in Canada, and those incurred in order to bring a new mine into production (and incurred before the mine is producing) in reasonable commercial quantities. The latter of these two types is often referred to as "pre-production development expenditures." Examples include amounts spent clearing or removing overburden, sinking a mine shaft or constructing an adit or other underground entry.

The Budget announced that pre-production development expenses will no longer be treated as CEE, but will instead be included in CDE. As such, they will be deducted for tax purposes more slowly. This will occur on a phased-in basis, starting in 2015. Such expenditures incurred during the period 2015 - 2017 will be treated as partly CDE and partly CEE; after 2017 all of such amounts will be CDE. Grandfathering relief will be provided for pre-production development expenditures made before 2017:

  • pursuant to a written agreement entered into before Budget Day; or
  • as part of a mine development where either construction was started, or engineering and design work for construction had commenced (as evidenced in writing), before Budget Day.4

Again, slower recognition of these expenditures is unhelpful for the mining industry, and affected taxpayers should review their expenditures to maximize CEE classification where possible. From a practical perspective most flow-through share deals whereby a mining company renounces expenditure pools to investors are done using CEE incurred on exploration rather than pre-production development expenditures.5 As such, flow-through shares should continue to play an important role in the financing of Canada's mining sector.


Individuals (other than trusts) who invest in flow-through shares may be entitled to additional tax benefits above and beyond the renounced exploration expenses available on all flow-through shares. Where certain qualifying expenditures (essentially expenses incurred in mining exploration above or at ground level conducted in Canada) are incurred and renounced to a holder of flow-through shares that is an individual (other than a trust), that holder is entitled to an investment tax credit equal to 15% of the renounced qualifying expenditures. This tax credit on "grass-roots" surface exploration expenditures is called the "mineral exploration tax credit."

The ITA currently requires that qualifying expenditures must be incurred by the corporation by the end of 2013 and renounced to the investor under an agreement made before April 2013. The Budget extends the 15% mineral exploration tax credit for another year, by extending (1) the date for incurring qualifying expenditures to the end of 2014, and (2) the deadline for the corporation and the investor to enter into the flow-through share subscription agreement governing renunciation to March 31, 2014.


1. For more on this topic, go to

2. For this purpose, activities such as obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities is not considered to constitute construction or engineering and design work.

3. For more on this topic, go to

4. See footnote 2.

5. This is because exploration CEE is required to use the "look-back" rule on expense renunciation and to obtain the mineral exploration tax credit (see below). For more on the taxation of flow-through shares, go to

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.