Nutrien Ltd., Saskatoon, cannot deduct millions of dollars in tax payments when calculating its income tax, a court in Canada has ruled, according to Bloomberg Law.
A 1974 law barring royalties and taxes to provincial governments from being used for tax deductions applies to over C$59.4 million ($46.2 million) in payments made by legacy Potash Corp. of Saskatchewan Inc. to the Saskatchewan government, Tax Court of Canada Justice John Owen wrote in a judgment posted Aug. 3 in the case Potash Corp. of Saskatchewan Inc. v. The Queen. Potash Corp. merged with Agrium Ltd. in 2018 to form Nutrien.
Owen rejected Potash Corp.’s view that the prohibition did not apply because the payments were not linked to producing potash. “The base payments are payments by the appellant to the Crown in right of Saskatchewan that are inextricably linked to mining and producing potash in Saskatchewan,” Owen wrote.
The Canada Revenue Agency rejected Potash Corp.’s use of the payments for deductions when the firm calculated its income for the 1999-2002 taxation years. The audits blocking the deductions were issued between 2015 and 2019.
The payments were made under Saskatchewan’s Potash Production Tax Schedule, which applies to companies mining potash in the province.
Potash Corp. challenged the audits at the Tax Court of Canada, arguing that the 1974 rule did not apply to the payments because the payments were tied to potash sales and were not related to the acquisition, development, or ownership of a resource property or the production of minerals.
However, Owen found “there is a direct and immediate connection between the production of potash and the subsequent sale or disposition of that potash. To find otherwise would be to ignore the commercial objective of any mining venture,” he wrote.
Nutrien declined comment on the decision on Aug. 3.