Ontario Eliminates Resource Allowance

In today’s provincial budget Ontario announced that it has eliminated the Ontario Resource Tax Credit and the Additional Tax on Crown Royalties. The Ontario Resource Tax Credit was generally viewed as beneficial for mining companies because it typically provided a greater tax benefit than a deduction of actual royalties and mining taxes paid.

In 2007 the federal resource allowance was fully eliminated and replaced with a deduction for actual royalties and mining taxes paid. However, Ontario continued to provide a resource allowance instead of a deduction for royalties and mining taxes. After harmonization with the federal corporate income tax regime in 2009, this has been done through the mechanism of the Ontario Resource Tax Credit and the Additional Tax on Crown Royalties.

Effective immediately Ontario proposes to harmonize with the federal government and other provinces by eliminating the Ontario Resource Tax Credit and the Additional Tax on Crown Royalties and providing a deduction for royalties and mining taxes paid. Accrued but unused Ontario Resource Tax Credit amounts would be eligible for carry-forward to offset Ontario income tax payable in the first five taxation years beginning after April 23, 2015.

Ontario estimates that eliminating the tax credit will increase government revenue by $7 million in 2015-16, and by $6 million in each of the next two subsequent years.