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.

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There are six types of qualifying expenditures:

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1.  Labour — personnel employed by the company

2. Overheads — either the proxy amount of 65% of directly engaged labour or a traditional overhead calculation

3. Materials — items consumed and/or transformed;

4. Subcontractors

5. Capital - all or substantially all used, or partially used, for SR&ED

6. Third Party Payments — typically funds paid to research institutes and universities.