Section 188.2

Denial of ITCs by virtue of ss. 188.2(2) and (3) (under “Eligibility for ITCs”)

Subject to the exclusion in proposed subsection 188.2(5), to the extent that a person acquires, imports or brings into a participating province property or a service for consumption, use or supply in the course of, or in connection with, mining activities of the person, the person is deemed to have acquired, imported or brought into the participating province, as the case may be, the property or service for consumption, use or supply otherwise than in the course of commercial activities of the person. This is set out in proposed subsection 188.2(2). Accordingly, the person would not be eligible to claim input tax credits (ITCs) with respect to such property or services acquired, imported or brought into a participating province after February 4, 2022. This treatment applies even if the person does not receive any remuneration as a consequence of performing a mining activity, for example, in circumstances where acquisitions are used in a mining activity however the person is not successful in earning any remuneration.

In addition, if a person at any time consumes, uses or supplies property or a service in the course of, or in connection with, mining activities of the person, that consumption, use or supply is deemed to be otherwise than in the course of commercial activities of the person in accordance with proposed subsection 188.2(3). This would apply if the consumption, use or supply of the property or a service occurs after February 4, 2022.

Imported taxable supply by virtue of ss. 188.2(2) and (3) (under “Self-assessments”)

The person will also need to consider the requirement to self-assess tax under Division IV with regard to imported taxable supplies as the exclusion from the definition of imported taxable supply for property or services acquired for consumption, use or supply exclusively in the course of commercial activities would not generally apply for property or services acquired for consumption, use or supply in whole or in part in mining activities. In addition, the person would also need to consider the requirement to self-assess tax under Division IV.1 with respect to any property or services that are brought into a participating province.

No GST collectible re mining activity (under “Collection of tax”)

Subject to the exclusion in proposed subsection 188.2(5) … where a person receives money, property or a service as a fee, reward or payment, or any other form of remuneration, as a consequence of performing a mining activity, the provision of the mining activity is deemed not to be a supply for GST/HST purposes under proposed subsection 188.2(4). Accordingly, the person would not be required to charge any GST/HST in respect of the provision of the mining activity. This would apply in respect of the receipt of any remuneration as a consequence of performing a mining activity that is received after February 4, 2022.

Two examples of the implications of not joining or joining a mining group (under “What are the implications of the proposed amendment in circumstances where proposed subsection 188.2(5) would apply?)

Example 1

Corporation A owns computing equipment for use in mining activities. Corporation B wishes to conduct mining activities and requires equipment which will allow Corporation B to validate cryptoasset transactions and add them to a publicly distributed ledger. Corporation B engages Corporation A for the supply of the use of Corporation A’s mining equipment. Corporation B is not a mining group operator for a group that includes Corporation A. Proposed subsection 188.2(5) would apply to Corporation A’s supply to Corporation B given that Corporation B’s identity is known to Corporation A. Therefore, proposed subsections 188.2(2) to (4) would not apply and the supply would be subject to the general GST/HST rules.

Example 2

Corporation C owns computing equipment and wishes to conduct mining activities. Corporation D operates a mining group and offers interested persons to join a mining group to conduct mining activities. Corporation C joins Corporation D’s mining group. Any supplies that Corporation C makes to Corporation D that are mining activities are subject to the provisions of proposed subsections 188.2(2) to (4) given that proposed subsection 188.2(5) does not apply. However, any supply of mining activities made by Corporation D to Corporation C would not be subject to the provisions of proposed subsections 188.2(2) to (4) as proposed subsection 188.2(5) does apply. Corporation C is not a mining group operator and Corporation C’s identity is known to Corporation D. The supply would be subject to the general GST/HST rules and Corporation C would not be entitled to claim ITCs related to this acquisition in accordance with proposed subsection 188.2(2).