Royalty and Tax Information
Potash Information Circular
Potash Production Tax System
This summary has been prepared by Saskatchewan Ministry of Energy and Resources to assist users in their understanding of the calculation of potash production taxes. For an exact statement regarding potash production taxes, refer to the Potash Production Tax Schedule of The Mineral Taxation Act, 1983 and The Potash Production Tax Regulations. In the case of conflict between this summary and the provisions of the Act and Regulations, the Act and Regulations will apply.
The potash production tax system was introduced January 1, 1990, and is set out in The Potash Production Tax Schedule of The Mineral Taxation Act,1983 and the Potash Production Tax Regulations. Potash production taxes (base payment and profit tax) apply to all potash that is produced from Saskatchewan lands.
The Base Payment is a monthly payment based on an estimate for the entire year. Producers pay net base payment as follows:
Net Base Payment = Gross Base Payment - [Crown Royalties + Freehold Royalties + Saskatchewan Resource Credit - Excess Deductions] - Tax Credits (prior year)
Producers pay profit tax on a quarterly basis, based on an annual estimate. Producers will pay this tax on profits of individual mines or on the consolidated profits of the producer's Saskatchewan potash operations.
Net Profit Tax = Gross Profit Tax - Base Payment Credits - Tax Credits
Gross Profit Tax is determined by rates which increase with profits per tonne sold, with tax brackets indexed for inflation, as follows:
Gross Profit Tax for a bracket is calculated by multiplying profit per tonne in the bracket by the producer's sales that are subject to profit tax, times the tax rate for the bracket.
The producer's sales that are subject to profit tax are:
The producer's Base Tonnes are:
The producer's Adjusted Base Tonnes are the producer's Base Tonnes multiplied by the Common Industry Adjustment Factor. Based on Base Tonnes in the previous year, the Common Industry Adjustment Factor is:
(total industry Base Tonnes of type A above + 35% of the total industry Base Tonnes of type B above)
Producers who participate in approved market development or research and development programs may claim a Tax Credit of 40% of the approved expenditure. If there is no profit tax otherwise payable, the Tax Credit may be deducted from the Base Payment in the following year.