Ontario mine operators are generally subject to a tax on mining profits under the Mining Tax Act (Ontario), based on amounts computed in $Cdn. For federal income tax purposes, the general rule under the Income Tax Act (Canada) is that all amounts must be computed in $Cdn but most corporations that use one of certain permitted foreign currencies as their primary currency for financial reporting purposes (their functional currency) may elect to compute their income tax results using that functional currency instead.
The 2011 Ontario Budget released on March 29, 2011 proposes to make amendments to the Mining Tax Act by allowing mine operators who are using such a functional currency for income tax purposes to elect to file their Ontario mining tax returns in the same functional currency. This election would apply until such time as the mine operator revokes its functional currency election under the Income Tax Act (Canada) or ceases to meet the conditions for functional currency reporting under either the Income Tax Act (Canada) or the Mining Tax Act.
As a result of these amendments, mine operators who follow functional currency reporting for corporate income tax purposes would no longer have to prepare a separate set of Canadian dollar financial statements solely for the purposes of filing the Ontario mining tax return. The amendments would be based on the functional currency rules in the Income Tax Act (Canada) and would apply for taxation years beginning after December 31, 2010.