June 2003
 

Budget Flash

Jocelyne Lamothe
Direction du développement minéral

Adjustment of the tax credit relating to resources

In the June 12, 2003 Budget Speech, the gouvernement du Québec announced that all of the tax credits and tax holidays for businesses will be tightened. The refundable tax credit for resources announced in the March 2001 Budget Speech as well as the temporary improvement added in August 2002 are aimed at by these tightening measures.

In this way, the total credit of 60% that was available to eligible mining corporations has been reduced by 25% and is distributed in the following proportions:

 

Corporations not operating any mineral resource

Other corporations

 

Refundable portion

Non-refundable portion

Total

Refundable portion

Non-refundable portion

Total

Expenses relating to mineral resources

Near or Far North

Elsewhere in Québec

 

 

33.75

30

 

 

11.25

15

 

 

45

45

 

 

18.75

15

 

 

26.25

30

 

 

45

45

Expenses relating to other natural resources (cut stone)

 

 

15

 

 

n.a.

 

 

15

 

 

15

 

 

n.a.

 

 

15

In addition, this credit will henceforth be taxable under both the Taxation Act and the Mining Duties Act.

This rate reduction as well as the taxation of the tax credit relating to resources will be applied to eligible expenses incurred after June 12, 2003.

Modification of the tax benefits relating to flow-through shares

Even though Québec’s flow-through share system is maintained until the end of year 2004, it also undergoes reductions that are comparable to those applied to the refundable tax credit for resources.

In fact, the additional deductions of 25% and 50% that were admitted previously to the individual investor decrease to 10,42% and 20,83% respectively. The individual may claim, for example, a total deduction equal to 131,25%, instead of 175%, regarding surface exploration expenses incurred in Québec that have been foregone in his favour.

Moreover, deductions for flow-through share issue expenses may no longer be foregone in favour of an investor and the additional capital gains exemption for flow-through shares is abolished. These modifications apply to flow-through shares issued after the day of the Budget Speech. However, they do not apply to flow-through shares issued either following a private placement or following an application for receipt of the final prospectus or prospectus filing exemption, as the case may be, made no later than the day of the Budget Speech.

Over the coming months, the Québec ministère des Finances will review the efficiency and utility of these two measures and will decide whether or not to maintain them.















Previous page