2021 Year-End Planning for Mining and Resource Companies
As 2021 comes to an end, below are a few reminders and things to note in your tax planning.
Flow-through shares (“FTS”)
A reminder of the FTS deadline extensions for incurring eligible costs to renounce to FTS investors:
- The look back rule extended from 12 months to 24 months for agreements in 2019 and 2020 and if the company is not using the look back rule then it has 36 months rather than 24 months to incur eligible expenses
- Watch stacked corporate structures (i.e. parent public company and subsidiary exploration comapnies) and additional FTS agreement(s) and FTS ID and filings required
- Watch additional reporting in Quebec (RL-11) if the investor is a limited partnership
Are you or do you have investors wanting to donate FTS? Please contact your DMCL advisor.
BC Mining Exploration Tax Credit (“BC METC”)
- A reminder that the BC claim form (“Form BC 421”) is due 18 months after the end of the year (20% of eligible expenditures or 30% if in Mountain Pine Beetle prescribed areas)
- We’re seeing more CRA audits! Some things to watch:
- ensure that timesheets are kept if the company wants to claim salaries paid for exploration work; technically an employee must spend substantially all (90%) of their time on exploration work to qualify although the CRA may accept less for small companies given that in-house geologists, geophysical and engineers may have to wear more than one hat
- maintain receipts
- costs that are not eligible include overhead (including salary costs that do not meet the substantially all test), off the shelf seismic data, bulk sampling
BC PST rebate
- A reminder of the BC PST rebate for corporations to recover PST paid between September 17, 2020 and March 31, 2021 on select machinery and equipment invoiced and paid for by March 31, 2022
- Deadline to apply is now September 30, 2022
- BC PST rebate on select machinery and equipment
Quebec Resource Tax Credit
(If you have not renounced in Quebec (vs Federally))
- On eligible mining exploration costs incurred in Quebec
- 31% refundable tax credit – Near North / Far North region
- 28% refundable tax credit – elsewhere in Quebec
- Watch – company needs a Quebec permanent establishment
- Deadline to claim is 18 months after the tax year-end
Quebec Mining Tax
- Payable if resource profits; refund if resource losses
- Up to 16% refundable tax credit on resource losses so if not producing then essentially on eligible mining exploration costs (similar to eligible costs for flow-through shares)
- Deadline to claim is 6 months after the tax year-end so watch short year-ends from RTOs, acquisition of control, going public
Employee Stock Options
A reminder to withhold and remit payroll withholdings to the CRA on employee/director/officer stock option benefits (withholdings due with company’s payroll due dates) and issue T4s due February 28, 2022.
- Canadian residents – a reminder to issue T4s (due Feb 28th 2022) for payments to individuals for services if they are not employees
- Non-residents – a reminder to withhold and remit 15% to the CRA on payments to non-residents for services rendered in Canada (with borders opening up!); withholdings are due the 15th of the month following payment in cash/in-kind. NR4s should also be issued and filed with the CRA no later than March 31, 2022
Foreign subsidiaries or affiliates?
- Accelerated T1134 reporting deadlines (12 months if year began for 2020 such as for December 31 year-ends and 10 months if year began in 2021) – late filing penalties $2,500+
Plan of Arrangement or RTO
Please let your DMCL advisor know as it may trip earlier and additional tax return filings.
Article written by Lori Oliver, CPA, CA.