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What ESTMA May Mean For You and Your Business
The Canadian Extractive Sector Transparency Measures Act, or ESTMA, impacts businesses involved in the resource exploration and extractive sector, both in Canada and elsewhere. ESTMA was made into law in December 2014 and came into force as of June 1, 2015. The Extractive Sector Transparency Measures Act requires these businesses to file and publish reports on certain types of payments to domestic and foreign governments.
ESTMA reporting requirement applies to organizations such as partnerships, trusts and companies that commercially develop oil, gas and minerals. The term “commercial development” covers, for example, exploration, extraction or acquisition of rights. It also applies to an entity that controls another entity engaged in these activities.
The requirements for ESTMA reporting by an entity are as follows, the entity must:
- Be listed on a stock exchange in Canada
- Do business, have a place of busienss or have assets in Canada based on its consolidated financial statements for a period of at least one of its two most recent finanical years.
The entity must also have at least two of the following:
- Assets of CDN$20 million
- Revenue of CDN$40 million
- An average of 250 employees
Here’s something else to note. The Canadian government has outlined certain categories of payments that must be publicly disclosed as part of the entities ESTMA reporting, which include:
- Payments of Royalties
- Production entitlements
- Infrastructure improvement payments
- Dividends (other than dividends paid as ordinary shareholders)
- Taxes (other than personal income or consumption taxes)
- Bonuses (such as production, signature or discovery bonuses)
- Fees (including entry and rental fees, regulatory charges, and other fees for licences, permits or concessions)
- Plus any other prescribed category of payment
Unless there’s a specific threshold prescribed by ESTMA regulations, companies need only disclose single or cumulative payments amounting to $100,000 or more. They must disclose payments made to government entities, whether these payments are monetary or in kind.
Check out more information on reporting requirements.
Deadline for annual reports
ESTMA’s annual report deadline is 150 days after an entity’s financial year-end. This applies to financial years starting after June 1, 2015. For example, companies with a December 31, 2016 year-end must submit their first annual report by May 30, 2017. However, they can defer reporting payments made to aboriginal governments or entities for a two-year period ending June 1, 2017.
A fine of up to $250,000 faces any person or entity not complying with the ESTMA reporting and record-keeping requirements, as well as failing to make the report accessible. And note: Under ESTMA, each day someone commits or continues the offence, it’s a new, separate offence.
ESTMA Guidance and Compliance Tools
On March 1, 2016, the Department of Natural Resources (NRCan) issued implementation tools for complying with ESTMA. These tools include:
- Guidance on the reporting requirements under ESTMA;
- Technical Reporting Specifications, i.e., the form and manner of reporting
- Reporting Template, and
- Contact Form for businesses to enrol as reporting entities with NRCan.
As yet, there are no ESTMA reports for us to refer you to, but keep checking the Natural Resources Canada website. NRCan will provide links to ESTMA reports as these become available.
If you require additional information on the new filing requirements stemming from ESTMA, or wish to discuss how to apply them for your company, please feel welcome to contact a member of the Manning Elliott Mining Team for assistance at 604-714-3600.
The above content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.