CANADA Law and Practice Contributed by: Darrell Podowski, Brian Dominique, Joel Matson and Christa Alvernaz, Cassels Brock & Blackwell LLP
(a) CEE include expenses that are incurred by the taxpayer for the purpose of deter - mining the existence, location, extent or quality of a mineral resource in Canada. Generally, CEE may be deducted at a rate of 100%, up to the taxpayer’s income for the year. Any unclaimed CEE may be car - ried forward indefinitely. (b) CDE include expenses that are not CEE and are incurred for the purpose of bring - ing a new mine in Canada into production (ie, pre-production mine development expenses). CDE may be deducted at a rate of 30% on a declining-balance basis. Unclaimed CDE may be carried forward indefinitely. An enhanced deduction is also available for certain CDE incurred after 20 November 2018 and before 2028 (Accelerated CDE). Accelerated CDE in - curred from 2024 through 2027 qualify for an additional deduction of 7.5%. • Certain corporations carrying out explora - tion and mining activities in Canada (other than for oil, gas and coal activities) can issue flow-through shares, pursuant to which the tax deductions attributable to certain expen - ditures incurred (such as CDE and CEE) are renounced by the corporation to the flow- through shareholders, such that the share - holders (and not the corporation) may deduct the renounced expenditures in computing their income. An additional 15% federal Min - eral Exploration Tax Credit (METC) is available with respect to certain flow-through mining expenditures (generally referred to as “grass - roots exploration” expenses). Many provinces offer parallel credits as high as 30% in some circumstances. • The Critical Mineral Exploration Tax Credit (CMETC) is a 30% federal tax credit for eligible flow-through mining expenditures renounced under eligible flow-through share
agreements entered into between 7 April 2022 and 31 March 2027. Among other requirements, eligible expenditures must be exploration expenses that primarily target deposits containing mostly (more than 50%) certain critical minerals. Eligible expenditures are not permitted to benefit from both the CMETC and the METC. • A refundable 30% investment tax credit, the “Clean Technology Manufacturing Investment Tax Credit”, was introduced for 2024, and made available for corporations that acquired certain new clean technology manufacturing property used primarily to produce specified critical minerals. • Contributions made to a qualifying environ - mental trust used to fund future reclamation are deductible in the year in which they are made (as opposed to reclamation expenses, which are generally recognised for income tax purposes at the time the reclamation is carried out). • Provincial governments also provide tax incentives for exploration and mining activi - ties that are carried out in the province. These incentives are structured as income tax cred - its or relief with respect to provincial mining taxes. Canada does not offer tax stabilisation agree - ments to non-resident investors in the mining industry. 4.3 Transfer Tax and Capital Gains on the Sale of Mining Projects A mining project may be disposed of by way of a sale of the mining assets or of the relevant entity in which the mining project is held. The disposition of capital property in Canada gener - ally results in a capital gain (or loss). For disposi - tions occurring after 24 June
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