Tax and regulatory developments in Canada, China and Ghana

Tax and regulatory developments

An overview of tax and regulatory developments in Canada, China and Ghana.

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Canada: A favorable mining tax regime

Canadian mining companies are subject to a three-tiered taxation system comprised of federal income tax, provincial income tax, andprovincial mining tax or royalties.

Mining activities receive special tax treatment and incentives at the federal and provincial level, to encourage investment in themineral resource sector. This includes deductions, allowances and credits thatmay be claimed against income from the mining operation.

Although in recent years the federal and provincial governments havewithdrawn some of these incentives, Canada continues to have a tax environmentfavorable to mining businesses and their investors, including:

  • relatively low rates of corporate income tax
  • rapid write-off of intangible expenses and the cost of tangible assets
  • facility to carry forward operating losses for 20 years,
  • most provinces impose a profit-based tax on miningoperations, instead of a royalty on gross mining revenues

China: a snapshot of mining tax laws

Businesses are subject to 25 percent corporate income tax onearnings related to operations in China. This may be reduced to 15 percent if 1)the enterprise is ‘high-technology’ or 2) it invests in the western regions ofChina and satisfies certain conditions.

Value added tax (VAT) for metal mining products andnonmetallic mining productsis 17 percent.

A 5 percent business tax is levied on the transfer ofnatural resources use rights. VAT may replace business tax in 2015. 

Mineral products imported into China are subject to customs duty, while some products are subject to export customs duty, includingpreliminarily processed mineral products.

Organizations and individuals engaged in mineral exploration within China arecharged resource tax

Charges and mining company royalties: non-oil and gasenterprises are subject to resource compensation fees, prospecting license feesand mining royalties.

Ghana: recent mining tax developments

In a recent publication of the Ghana Chambers of Mines, Ghana was rankedsecond highest in terms of effective tax rate among twenty or so miningcountries worldwide. 

Corporate tax for mining companies is 35 percent. A windfallprofit tax of 10 percent has been stalled. 

Tax depreciation on tax depreciable assets used in miningand petroleum operations, is now 20 percent per annum. 

In addition, certain depreciable assets are subject to capital gains tax of 15 percent upon disposal where the proceeds exceed the cost. 

VAT is now 5 percent, excluding the 2.5 percent National Health Insurance Levy (NHIL). 

Mining company royalties are now fixed at 5 percent. 

All companies involved in inter-related party transactions must file transfer pricing tax returns. 

Ring fencing prohibits mining companies from chargingexpenditure on different concessions/mining areas, which exposes them toadditional taxes.

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