Tax Insights: Changes to Quebec's mining tax regime

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After several months of deliberation and uncertainty, the Quebec government has finally announced changes to its mining tax regime.

According to the Quebec government, changes to the province’s mining tax regime will respect the five core principles it established:

  1. All mining corporations must pay royalties
  2. Quebecers must benefit more extensively from mining operations
  3. More jobs in the processing sector
  4. More responsible exploitation of mining resources
  5. A more transparent regime

The main changes announced, which apply to fiscal years beginning after December 31, 2013 (unless otherwise indicated), include:

  • a new method of calculating the mining tax, which will require an operator to pay a mining tax equal to the higher of:
    • a minimum mining tax calculated on the output value at the mine shaft head (OVMSH)
    • a mining tax on its annual profit
  • changes to current mining tax rules that:
    • increase the processing allowance an operator may claim
    • introduce a progressive mining tax scale based on operator profit margin
    • establish so called ‘integrity rules’
  • a new non refundable minimum tax credit

The following is a brief overview of the proposed changes.

An operator’s minimum tax will equal the total of:

  • 1% of the lesser of:
    • total of each of the OVMSH amounts for each mine operated by the operator over the fiscal year
    • $80 million
  • 4% of total OVMSH amounts in excess of $80 million

The $80 million limit must be prorated if the fiscal year is less than 12 months, and it must be shared by associated operators.

The OVMSH corresponds to the gross value of the operator’s output, less the amount of any expenses that are deductible for the purpose of calculating the operator’s annual earnings and incurred after the ore is brought to the first accumulation site.