Statutes of Newfoundland 1994 Chapter 26

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Statutes of Newfoundland 1994

CHAPTER 26 CHAPTER 26

AN ACT TO AMEND THE MINING AND MINERAL RIGHTS TAX ACT
(Assented to December 16, 1994)

Analysis

1. S.2 Amdt.
Definitions

2. S.3 R&S
Inspector

3. S.4.1 Added
Deduction

4. S.5 R&S
Net income

5. S.6 Amdt.
Taxable income

6. S.8 Amdt.
Tax on right to mine

7. S.9 Amdt.
Tax on rentals, etc.

8. S.10 Amdt.
Deduction of tax at source

9. S.11 Amdt.
Construction to be placed on prior statutes, contracts, etc.

10. S.12 Amdt.
Duty to give notice

11. S.13 Amdt.
Return

12. S.14 Amdt.
Secrecy

13. S.17 R&S
17. Powers of inspector 17.1 Actions against

inspectors

14. S.19 R&S
Payment by taxpayer of deficiency

15. S.20 Amdt.
Power to prescribe books

16. Ss.21, 22, 23 & 24 R&S
21. Review of estimated tax
22. Appeal to Trial

Division
23. Appeal to Court of

Appeal
24. Effect of delay

17. S.25 Amdt.
Irregularity in procedure

18. S.30 Amdt.
Taxes constitute encumbrance upon estate of taxpayer

19. S.32 Amdt.
Offences

20. S.33 R&S
Liability of directors, etc.

21. S.34 Amdt.
Regulations

22. Commencement

Be it enacted by the Lieutenant-Governor and House of Assembly in Legislative Session convened, as follows:

RSN 1990 cM-16 as amended

1. (1) Paragraphs 2(a), (b) and (c) of the Mining and Mineral Rights Tax Act are repealed and the following substituted:

(a) "arm's length" has the same meaning as under section 251 of the Income Tax Act (Canada);

(b) "assessment" means an assessment, a reassessment, an amended assessment or an additional assessment of tax under this Act;

(c) "commercial production" means a point when 60% of the stated processing capacity is achieved for 30 days or as the minister may determine;

(c.1) "contractor" means a person having a right to carry out a mining operation for the delivery of minerals to the lessor or for the sale of those minerals for valuable consideration from the lands on or in which that right exists;

(c.2) "exploration expenditure" means an expenditure relating to prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore in the province;

(c.3) "fair market value" means the value of a transaction determined by bargaining in good faith between informed persons whether or not there is an actual transaction;

(2) Section 2 of the Act is amended by adding immediately after paragraph (e) the following:

(e.1) "inspector" means an inspector appointed under section 3;

(e.2) "joint venture" means a business undertaking entered into by 2 or more persons which terminates upon completion of that undertaking or where the control and contribution of resources are shared;

(3) Paragraphs 2(k) and (l) are repealed and the following substituted:

(k) "person" in addition to the ordinary meaning ascribed to the word and the meaning conferred by the Interpretation Act, includes a partnership, limited partnership, association, syndicate, joint venture or co-venture of any kind;

(l) "pre-production expenditure" means costs incurred in order to bring a mine into production, less revenue earned prior to coming into production;

(l.1) "processing" means the processing of minerals extracted from land on or under which there are mining operations within the province and includes the concentrating and milling of minerals;

(l.2) "processing assets" means processing plants, machinery, equipment and structures acquired for the purpose of processing mineral substances, but does not include smelting assets;

(l.3) "smelting" means a metallurgical operation in which metal is separated from those impurities with which it may be chemically combined or physically mixed;

(l.4) "smelting assets" means assets used in the process of smelting metallic products and includes necessary plant, machinery, equipment and structures;

2. Section 3 of the Act is repealed and the following substituted:

Inspector

3. (1) The minister may appoint or designate a person or a class of persons as an inspector for the purposes of this Act.

(2) The minister may authorize a person employed in the department or a person or class of persons designated under subsection (1) to perform and exercise those duties imposed and powers conferred by this Act upon the minister that may, in the opinion of the minister, be conveniently performed or exercised by that person or class of persons and the performance or exercise of those duties or powers shall be of the same effect as if they were performed or exercised by the minister.

3. The Act is amended by adding immediately after section 4 the following:

Deduction

4.1 (1) A person may, in the current taxation year, deduct from the amount payable under section 4, the amount payable to the province under the Income Tax Act in respect of mining income in the province for that year.

(2) Subsection (1) shall apply only for each year of the 1st 10 years after the achievement of commercial production in the mine from which the mining income is derived.

(3) Notwithstanding paragraph 2(c), the minister may, where he or she considers it necessary, determine that a mine is not in commercial production in a year.

4. Section 5 of the Act is repealed and the following substituted:

Net income

5. (1) The net income of a taxpayer shall be ascertained by deducting from the gross income of the taxpayer

(a) all expenses and outlays reasonably incurred in mining operations and in processing;

(b) depreciation expenses that may be prescribed by regulation respecting vehicles, machinery, plant, equipment, buildings and other assets of a capital nature used in mining operations and in processing and the Lieutenant-Governor in Council may prescribe different rates and methods of depreciation for different kinds of capital assets;

(i) unamortized pre-production expenditures divided by the estimated remaining life of the mining operation, and

(ii) on-site and off-site exploration expenditures exclusively incurred by the taxpayer anywhere in the province during that or a previous financial year and those expenditures may be carried forward on 1 occasion and applied against future revenues within a period not exceeding 5 years from the time when those expenditures occurred;

(d) all money paid to the Crown during the financial year by way of rentals, royalties, charges and other payments for the right to engage in the mining operations which generates all or part of the gross income, but not a payment by way of taxation;

(e) reserves for doubtful debts that the minister in his or her absolute discretion permits for the mining operations during the financial year;

(f) those amounts respecting those items that are prescribed by regulation; and

(g) an amount by way of return on capital directly and necessarily employed by the taxpayer in processing equal to

(i) with respect to processing other than smelting, 8% of the original cost of the depreciable assets, exclusive of interest charges, including machinery, equipment, plant, buildings, works and improvements used by the taxpayer, and

(ii) with respect to smelting, 15% of the original cost of the depreciable assets, exclusive of interest charges, including machinery, equipment, plant, buildings, works and improvements used by the taxpayer,

but the amount deducted under this paragraph shall not exceed 65% of the portion remaining after deducting from the gross income the amounts specified in paragraphs (a) to (f).

(2) Notwithstanding paragraph (1)(g), if 15% of the taxable income calculated under section 6 exceeds the amount of the processing and smelting allowance calculated under paragraph (1)(g) then that 15% of the taxable income shall be the amount deductible under paragraph (1)(g).

(3) For the purpose of calculating the net income under paragraph (1)(b),

(a) where the vehicles, machinery, plant, equipment and buildings have been disposed of in a financial year, the proceeds from the disposal shall be applied to reduce the cost or value of additions to them in that year;

(b) where those proceeds exceed the cost of the additions, the excess shall be applied to reduce the balance remaining to be depreciated of those assets acquired in previous financial years; and

(c) where no balance remains to be depreciated, the excess shall be applied to reduce deductions otherwise allowable under subsection (1).

(4) A deduction shall not be made from gross income under subsection (1) with respect of those disbursements, expenditures or payments that are prescribed by regulation.

5. (1) Paragraph 6(a) of the Act is amended by striking out the word "other" where it first occurs and substituting the word "similar".

(2) Paragraph 6(b) of the Act is repealed and the following substituted:

(b) 20% of the net income,

whichever is the greater.

6. Subsection 8(1) is amended by striking out the word "other" where it first occurs and substituting the word "similar".

7. (1) Paragraph 9(2)(a) of the Act is repealed and the following substituted:

(a) legal expenses incurred by the taxpayer in the collection of rental, royalty or similar payment from the operator or contractor;

(2) Paragraph 9(2)(c) of the Act is amended by striking out the word "other" where it first occurs and substituting the word "similar".

8. (1) Subsection 10(1) of the Act is amended by striking out the word "other" where it last occurs and substituting the word "similar".

(2) Subsection 10(3) of the Act is amended by striking out the word "other" where it first occurs and substituting the word "similar".

(3) Subsection 10(5) of the Act is amended by striking out the word "other" where it last occurs and substituting the word "similar".

9. Paragraph 11(b) of the Act is amended by striking out the word "other" where it last occurs and substituting the word "similar".

10. (1) Paragraph 12(1)(b) of the Act is amended by striking out the word "other" and substituting the word "similar".

(2) Subsection 12(1) of the Act is amended by striking out the words "of the fact that the mine is in production or that the payment is required to be made".

(3) Subsections 12(2) and (3) of the Act are repealed and the following substituted:

(2) A person who fails to give the notification required under subsection (1) is guilty of an offence and is liable on summary conviction to a fine of not less than $200 and not more than $10,000 or to imprisonment for a term of not more than 6 months or to both a fine and imprisonment.

11. Subsections 13(3) and (4) of the Act are amended by striking out the word "assessor" and substituting the word "inspector".

12. Section 14 of the Act is amended by striking out the word "assessor" and substituting the word "inspector".

13. Section 17 of the Act is repealed and the following substituted:

Powers of inspector

17. (1) An inspector may, so long as it is reasonably necessary to determine compliance with this Act, at reasonable times, enter upon the business premises of a person or upon the property of a taxpayer or a person referred to in subsection 20(3) and may

(a) examine returns required to be made under section 13;

(b) determine that the returns referred to in paragraph (a) are correct;

(c) inspect, audit, examine and take copies of bank statements, books of account, records, vouchers, financial statements including balance sheets and profit and loss statements, or other documents;

(d) calculate the amount of tax payable by the taxpayer; and

(e) examine persons under oath or affirmation, at times and places designated by the inspector, on all matters within the powers and duties of the inspector

and the taxpayer or other person in charge of that building, place of business, or property shall answer all questions pertaining to those matters and shall produce for inspection those bank statements, books of account, records, vouchers, financial statements, balance sheets, profit and loss statements or other documents that the inspector may request.

(2) An inspector, or other person authorized by the minister under section 3, has all the powers of a commissioner under the Public Inquiries Act.

Actions against inspectors

17.1 Where a court, before which a proceeding is taken against an inspector, or other person authorized by the minister under section 3, for anything done by him or her under section 17 is satisfied that there was probable cause for the action of the inspector or other person and that the action was not malicious, a verdict or judgment shall not be given against the inspector or other person for more than $0.05 damages or for costs of suit.

14. Section 19 of the Act is repealed and the following substituted:

Payment by taxpayer of deficiency

19. Notwithstanding a prior assessment, or where an assessment has not been made, a taxpayer continues to be liable for tax and to be assessed for tax, and the minister may at any time assess a taxpayer for tax, interest and penalties and may, at any time, if the taxpayer has made a misrepresentation or committed a fraud in making the return or supplying information under this Act, reassess or make additional assessments upon the taxpayer for tax, interest and penalties.

15. (1) Subsection 20(1) of the Act is amended by striking out the word "assessor" where it first occurs and substituting the word "inspector" and by striking out the word "assessor" where it last occurs and substituting the word "minister".

(2) Subsection 20(2) of the Act is amended by striking out the word "assessor" wherever it occurs and substituting the word "inspector".

16. Sections 21, 22, 23 and 24 of the Act are repealed and the following substituted:

Review of estimated tax

21. A taxpayer who objects to the amount of tax assessed under this Act or who considers that no tax is payable may, personally or by an agent, within 90 days of receiving that notice of assessment, apply to the minister for a review and the minister, after considering the application, shall confirm, amend or revoke the assessment and notify the taxpayer accordingly.

Appeal to Trial Division

22. (1) A person may appeal to a judge of the Trial Division where

(a) the person disputes the amount of estimated tax confirmed or amended by the minister under section 21, or his or her liability for it; or

(b) the person feels aggrieved by a penalty or interest imposed under section 15 or 16.

(2) In order to appeal under subsection (1), the appellant shall, within 30 days of being notified, in writing, of a decision made under section 15, 16 or 21, file in the Registry of the Supreme Court a notice of appeal.

(3) The notice of appeal under subsection (2) shall set out the grounds of the appeal and a copy of the notice of appeal shall be served on the minister.

(4) The appellant shall, within 14 days after service of a copy of the notice of appeal on the minister under subsection (3), apply to a judge of the Trial Division for the appointment of a day for the hearing of the appeal and shall, not less than 14 days before the day appointed for the hearing, serve upon the minister a written notice of that day.

(5) The appeal and the evidence brought forward by the appellant and the Crown shall be heard by the judge in a summary manner and the judge shall, after considering those aspects that the judge in his or her discretion considers necessary in the interest of justice, decide the appeal

(a) by upholding, reducing or cancelling

(i) the estimate of tax as confirmed or amended by the minister, or

(ii) the penalty or interest as confirmed or amended by the minister; or

(b) by making another decision that the judge considers appropriate in the circumstances.

(6) Papers and documents in the possession of the minister and affecting the matter of the appeal shall be produced before the judge on the hearing of the appeal.

(7) The costs of the appeal are in the discretion of the judge who hears the appeal and he or she may make an order respecting costs in favour of or against the Crown and may fix the amount of those costs.

Appeal to Court of Appeal

23. (1) An appeal may be taken to the Court of Appeal from a decision of a judge of the Trial Division upon a point of law raised upon the hearing before that judge.

(2) The rules governing appeals to the Court of Appeal from a decision of a judge of the Trial Division apply to appeals under this section.

Effect of delay

24. The giving of a notice of appeal by a person or a delay in the hearing of that appeal does not

(a) affect

(i) the due date of a tax or a part of it under this Act that is the subject matter of an appeal,

(ii) the interest or penalties provided by this Act in respect of a tax due, or

(iii) a liability for payment of a tax provided by this Act; or

(b) delay the collection of a tax,

but where the tax is set aside or reduced on appeal, the minister shall refund to the person entitled to it the excess of tax paid and an additional penalty or interest paid on it.

17. Section 25 of the Act is amended by striking out the word "assessor" and substituting the words and comma "minister, inspector".

18. Subsection 30(2) of the Act is amended by adding immediately after the word "an" the word and comma "inspector,".

19. (1) Subsection 32(1) of the Act is repealed and the following substituted:

Offences

32. (1) A person who fails to pay the tax required to be paid under this Act or contravenes a section of this Act is guilty of an offence and is liable on summary conviction

(a) for a 1st offence to a fine of not less than $1,000 and not more than $10,000 or to imprisonment for a term of not more than 6 months or to both a fine and imprisonment;

(b) for a 2nd offence to a fine of not less than $2,500 and not more than $20,000 or to imprisonment for a term of not more than 6 months or to both a fine and imprisonment; and

(c) for a 3rd or subsequent offence to a fine of not less than $5,000 and not more than $30,000 or to imprisonment for a term of not less than 6 months or to both a fine and imprisonment.

(2) Subsection 32(2) of the Act is amended by striking out the word "company" wherever it occurs and substituting the word "corporation".

(3) Section 32 of the Act is amended by adding immediately after subsection (5) the following:

(6) In addition to the fines imposed under subsection (1), a court shall order a person who defaults in the payment of those fines be imprisoned for a period of not less than 1 month and not more than 6 months and that period of imprisonment shall be in addition to any other period of imprisonment imposed under this section.

20. Section 33 of the Act is repealed and the following substituted:

Liability of directors, etc.

33. (1) In addition to the penalties imposed under section 32, where a corporation is guilty of an offence for failing to pay the tax due by the corporation under this Act or the regulations and an officer, director or agent of that corporation has been convicted of directing, authorizing or participating in the commission of that offence, the court shall order the officer, director or agent to pay the tax that the corporation has been convicted of failing to pay and in default of the payment of that tax, the court shall order that officer, director or agent imprisoned for a term of not less than 1 month or not more than 6 months.

(2) In a prosecution under this section, an officer, director or agent of a corporation is not liable to pay the tax that the corporation has been convicted of failing to pay under subsection (1) where that officer, director or agent shows that he or she exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances.

21. (1) Paragraph 34(1)(a) of the Act is repealed.

(2) Subsection 34(1) of the Act is amended by adding immediately after paragraph (e) the following:

(e.1) prescribing depreciation, expenses deductions and disallowed deductions allowable or disallowed under paragraphs 5(1)(b) and (f) and subsection 5(4);