Ontario is Canada’s most populous province and home to numerous existing and potential mining operations. The recent Ontario budget provides tax savings for mining companies and tax incentives for investors who buy flow-through shares in junior mining companies.
Mining Tax Rate Reduced
The budget reduces the mining tax rate from 20% to 10% over 5 years, as follows:
Mining tax rate
To May 1, 2000
May 2, 2000
January 1, 2001
January 1, 2002
January 1, 2003
January 1, 2004
Mining Tax Holiday Extended
The existing 3-year mining tax holiday is extended to 10 years for new mines opened in remote Ontario locations after January 1, 2001. After the 10-year holiday expires, profits from the operation of a remote mine will be taxed at 5%. (The meaning of "remote location" is not elaborated on in the budget papers. Draft legislation, when released, is expected to provide details.)
Tax Incentives for Investors in Flow-through Shares
New rules for flow-through shares will allow investors to inflate any exploration expenses passed through to them by 30%, increasing the amount investors can deduct for tax purposes from 100% of exploration expenses to 130%.
The Ontario budget measures are designed to boost Ontario's mining industry, concentrated mainly in northern Ontario. The Ontario mining tax is a 20% tax on mining profits over $500,000 earned from mining operations in Ontario. The budget cuts the mining tax rate in half over five years. In addition, miners in remote locations will enjoy tax savings due to the more generous mining tax holiday.
The new rules for flow-through shares are also welcome news for mining companies, because this change will help miners find investors to finance exploration.
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