Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: 1. When will the prescribed form for certification be available to the public? 2. Before the prescribed form becomes available, can the CRA describe the certification process?
Position: 1. The prescribed form is going to be made available to the public within the next few weeks from the date of this response. 2. Yes; a description of the process and the required information is detailed in this response.
2022 CTF Annual CRA Round Table – November 29, 2022
Question 5: The New Proposed Critical Mineral Exploration Tax Credit
Background
In order for taxpayers to be eligible for the critical mineral exploration tax credit (“CMETC”) one of the requirements is that a qualified professional engineer or professional geoscientist provide certification within the 12-month period immediately preceding the time that the flow-through share (“FTS”) agreement is made, in prescribed form and manner, that the expense will be incurred pursuant to an exploration plan that primarily targets critical minerals. Presently, there is no prescribed form available to taxpayers.
Given that the CMETC applies to FTS agreements entered into after April 7, 2022, can the CRA:
a) provide some guidance to taxpayers as to when the prescribed form will be made available; and
b) describe the certification process, including the information that it will require as part of that process for corporations that have issued FTS before to the prescribed form is made available?
CRA Response
Unless otherwise stated, all references to a statutory section, subsection or paragraph in this response are references to the relevant provision of the Income Tax Act, R.S.C. 1985 (5th Suppl.) c.1, as amended.
History
The CMETC was announced on April 7, 2022 as part of Budget 2022. Draft legislation was released by the Department of Finance on August 9, 2022 which included provisions relating to the CMETC that, if and when enacted, will apply as of April 7, 2022. Provisions relating to the CMETC were included in Bill C-32 (“Proposed legislation”) which was tabled in Parliament on November 3, 2022. Those provisions, if and when enacted, would also apply as of April 7, 2022.
General
An expenditure that is to be renounced under an FTS agreement will not meet the definition of “flow-through critical mineral mining expenditure” in subsection 127(9) of the Proposed legislation unless, among other things:
- a qualified professional engineer or professional geoscientist certification (“Certification”) is completed in respect of that FTS agreement, and
- that Certification is made in “prescribed form and manner”.
Prescribed Form and Manner
A prescribed form for the Certification is in the process of being completed and will be released to the public in the coming weeks. It is anticipated that it will be required to be attached to one of the existing forms that are already required to be completed in connection with an FTS offering, such as the T100A. Specific instructions on this point will be released at the same time that the prescribed form is released.
Completion of an FTS Offering Before the Prescribed Form is Released
Subject to the comments in the next section below, for an FTS agreement that is made after April 7, 2022 and before the date that a prescribed form for the Certification is released to the public, the CRA will accept a letter signed by a “qualified professional engineer or professional geoscientist” (as defined in the definition in subsection 127(9) of the Proposed legislation) within the 12-month period immediately preceding the time that the FTS Agreement is made. That signed letter must include the following information:
- the name, address and business number of the corporation offering the FTS;
- the targeted critical mineral(s);
- a brief explanation of why it is expected that the mineral deposit(s) being explored will contain primarily (i.e., more than 50%) critical minerals;
- the name, occupation and business address of the qualified professional engineer or professional geoscientist; and
- the name of the professional association to which the qualified professional engineer or professional geoscientist belongs and their membership identification number.
The signed letter should be attached to the Form T100A for the FTS offering that is being made pursuant to the FTS agreement.
The corporation offering the FTS should also keep in its records, and make available to the CRA upon request, documents that support the Certification, such as the following:
- a map of the project area including claim outline(s) and claim number(s),
- a description of the geological features of the property(ies),
- a description of proposed exploration activity(ies) and how they relate to the targeted critical mineral(s),
- copies of exploration plan(s) submitted for approval to the board of directors of the corporation, and
- copies of exploration plan(s) submitted for approval to the regulating authorities.
Other Comments: Proposed legislation
As noted above, the Proposed legislation relating to the CMETC has not yet been enacted and the final legislation that is enacted could differ from the Proposed legislation (some of which is referred to in this document).
In response to Question 16 at the CRA Round Table of the 2009 Canadian Tax Foundation’s Annual Conference, we made the following comments regarding the filing of tax returns based on proposed legislation:
It is the CRA’s longstanding practice to ask taxpayers to file on the basis of proposed legislation. This practice eases both the compliance burden on taxpayers and the administrative burden on the CRA. However, where proposed legislation results in an increase in benefits (for example, Canada child tax benefit) to the taxpayer, or if a significant rebate or refund is at stake, the CRA’s past practice has generally been to wait until the measure has been enacted.
…
Generally speaking, the CRA will not reassess if the initial assessment was correct in law. As a result, a taxpayer’s request to amend their tax records to reflect proposed legislation will be denied. It is recommended that taxpayers file a waiver in respect of the normal reassessment period to protect their interests.
In the event that the government announces that it will not proceed with a particular amendment, any taxpayers who have filed on the basis of the proposed amendment are expected to take immediate steps to put their affairs in order and, if applicable, pay any taxes owing. Where taxpayers acted reasonably in the circumstances, took immediate steps to put their affairs in order, and paid any taxes owing, the CRA will waive penalties and/or interest as appropriate.
The above comments should be taken into account by any taxpayer seeking to claim an investment tax credit based on the Proposed legislation.
N. Verlinden and K. Wharram
2022-094975
November 29, 2022
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