On May 6, the Government of Québec announced a new mining
tax regime, which, if passed by the National Assembly, will be
effective as of January 1, 2014.
General Overview of Proposed New Rules
The current system providing for an annual tax on profits at a
rate of 16% would be replaced by a two-tier system under which the
mining tax required to be paid by mining companies would be the
A mining tax on output value at the mine shaft head (which may
not be less than 10% of the gross value); or
A progressive mining tax on profit.
It follows that all mine operators active in Quebec would have
to pay a minimum mining tax going forward.
The minimum mining tax on output value at the mine shaft head
would be computed annually:
At a rate of 1% for the first C$80 million; and
At a rate of 4% beyond this threshold.
The progressive tax rates on mining profit based on an
operator's profit margin (annual profit divided by gross output
value of the mine) would be as follows (Figure 1):
1st segment: 0% to 35%
2nd segment: 35% to
3rd segment: 50% to
Where applicable, that portion of the minimum mining tax in
excess of the progressive mining tax on income could be applied to
reduce the progressive mining tax on profit in the future (subject
to payment of the minimum tax every year).
In computing profit, the processing allowance will be
The rate applicable on eligible assets in Quebec:
Would increase from 7% to 10% when a mine operator engages
solely in concentration operations (including smelting activities
and gold and silver refining);
Would increase from 10% to 20% when a mine operator engages in
processing operations in Quebec (smelting, refining, production of
metal powder and billets); and
The maximum processing allowance would increase from 55% to 75%
of the annual profit of each mine.
The Government expects that this new regime could boost tax
revenues by between C$73 million and C$200 million per year in
Other Measures Expected
Based on the announcement, the next reform of the Mining
Act, the tabling of which is expected over the next few weeks,
would include provisions on the transparency of mining operations
requiring the following information to be made public:
The annual mining tax paid by each mining corporation; and
Information on tonnage mined.
In its press release, the Government also announced that
measures aimed at creating more jobs in the processing sector would
be included in the next reform of the Mining Act.
Finally, it should be kept in mind that the draft regulations
increasing the financial guarantee that mining corporations will be
required to provide has been submitted to a comment period and will
likely be passed over the next few weeks. Under this new
regulation, mining operators shall be required henceforth to
provide a financial guarantee covering 100% of the cost of
restoring the mines they operate (see our preceding newsletter for
more information on this topic: "
Quebec mining industry: Regulatory reform is
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