SR&ED for MINING Companies
THE ARCK ADVANTAGE | SRED CLAIMS THROUGH FORENSIC ANALYSIS
Tax planning for many mining companies has often been a second thought. Yet, given the past rush on commodities prices over the past few years, a greater number of mining companies have become taxable or at least approached taxable positions. As a result, more mining companies are searching for ways to offset taxable positions. An often overlooked tax relief is Scientific Research and Experiment Development (SR&ED) investment tax credits (ITCs).
R&D typically conjures up images of white lab coats, beakers and test tubes. Some would think that the mining industry is not considered to be heavily involved in R&D efforts — how can pushing dirt or blowing up rock be technologically savvy? But the delineation of SR&ED in Canada is fairly broad and mining companies may have more SR&ED than they think.
There are six types of qualifying expenditures:
Labour — personnel employed by the company
Overheads — either the proxy amount of 65% of directly engaged labour or a traditional overhead calculation
Materials — items consumed and/or transformed;
Capital - all or substantially all used, or partially used, for SR&ED
Third Party Payments — typically funds paid to research institutes and universities.
Typical Unclaimed SR&ED Expenditures
Environment (e. g. greenhouse gas reduction, wildlife, reclamation)
IT development (e. g. communications, modeling simulations, process control systems, and remote equipment)
Mining Operations (e. g. pilots, improved mining methods, wear reduction, and drilling equipment)
Processing (e. g. improving throughput, ore feed changes, and energy reductions)
Exploration (e. g. new detection methods and equipment and software development)
Working with universities and research institutes.
Development of a process for re-entering existing vertical wells to convert them to horizontal wells.
Construction and operation of a field pilot plant to obtain engineering and other data on applications, conditions, interactions, relationships, equipment, and environmental effects.
Development of an in situ cyclic steam stimulation process for oil recovery from the Athabasca oil sands.
How do we serve Mining Companies with SR&ED?
A Canadian-controlled private corporation (CCPC) can earn ITCs of 35% up to the first $4 million of qualified expenditures for SR&ED carried out in Canada and 20% on any excess amount. Generally, a CCPC with a taxable income in the immediately preceding year that does not exceed the business limit may receive a portion of the ITC earned as a refund, after applying these tax credits against taxes payable. Other Canadian corporations, proprietorships, partnerships and trusts can earn an ITC of 20% of qualified expenditures. It is non-refundable but may be used to reduce any taxes payable. In addition to the above federal ITCs, extra provincial incentives are also available; in some provinces, like Alberta, Newfoundland, Qubec and Saskatchewan, the provincial incentives are cash refundable for all companies.
Mining companies can also take advantage of two added benefits:
Companies can deduct the current and capital SR&ED expenditures to reduce income for tax purposes in the current year or carry these expenditures forward to reduce your income for tax purposes in future years
Unused ITCs may be carried back three years or carried forward 20 years.
What did you do that was above and beyond standard knowledge within your field?
What was the obstacle that had to be overcome, or what was the concern that couldn’t be solved based on current industry knowledge? In other words, what were the challenges encountered?
(Systematic Investigation)Is the work evident of investigation, experimentation, and/or analysis, by qualified personnel?
Industries that Qualify for SR&ED
- Aeronautics Aerospace
- Automotive Manufacturing
- Chemical Manufacturing
- Food & Beverage
- Furniture Manufacturing
- Paper & Packaging
- Tool and Dye
- Waste Management
Contact us for a FREE consultation and we will help you determine what's eligible.
Call 1(905)604-6156 or fill out this form below: