CRA releases three mining industry interpretations

The CRA recently released three tax interpretations relating to the mining industry.

• In 2012-0480021I7 (released September 18, 2013), the CRA correctly advised that the grant an option in respect of a mineral property would be considered the disposition of “an interest in” that mineral property by the grantor. As authority, the CRA cited the Supreme Court of Canada’s decision in Frobisher Limited v. Canadian Pipelines & Petroleums Limited, [1960] S.C.R. 126.
• In 2011-0431031E5 (released September 23, 2013), the CRA advised that a Guatemalan tax computed on gross revenue would qualify as an “income or profits tax” under Canada’s foreign tax credit rules and foreign affiliate regulations. The income tax regime in Guatemala allows a taxpayer to annually choose whether to pay income tax on its gross revenue or net profits. The CRA said taxpayers would rarely elect to pay tax in an amount greater than the amount of tax computed on their net profits. As a result, the CRA concluded the Guatemalan tax on gross revenue should be considered as (1) “tightly linked and subordinate to” what would otherwise be an income or profits tax, and (2) “indirectly determined by reference to” a taxpayer’s income or profits.
• In 2013-0474611E5, the CRA confirmed that graphite deposits would qualify as a “mineral resource” as defined in s. 248(1). This view was based an opinion from Natural Resources Canada that graphite to be extracted from these deposits would qualify as “an industrial mineral contained in non-bedded deposit”.