T-0.1 - Act respecting the Québec sales tax

Section 39.4 Disposition versions

2001-12-20

39.4. If, under an agreement in writing between a person (in this section referred to as the “farmor”) and another person (in this section referred to as the “farmee”), the farmor transfers to the farmee particular natural resource rights, or portions of them, relating to unproven property in consideration or part consideration for the farmee undertaking the exploration of the property for mineral deposits, providing information, or the right to it, gathered from the exploration and, subject to any conditions that may be provided in the agreement, developing the property for the production of minerals, the following rules apply:

(1)  the value, as consideration, of any property or service given by the farmor to the farmee under the agreement is deemed to be nil to the extent that the property or service is given as consideration for any of the following (each of which is referred to in this section as the “farmee’s contribution”):

(a)  the undertaking of that exploration or development,

(b)  the provision of that information, or the right to it, and

(c)  any transfer under the agreement by the farmee to the farmor of any interest in specified mining or well-site equipment that is used by the farmee exclusively in that exploration or development;

(2)  the value of the farmee’s contribution as consideration for any property or service given by the farmor to the farmee under the agreement is deemed to be nil; and

(3)  if part of the consideration given by the farmor for the farmee’s contribution is property or a service (each of which is referred to in this paragraph as the “farmor’s additional contribution”) that is not a natural resource right relating to unproven property,

(a)  the farmee is deemed to have made, at the place at which the unproven property is situated, a taxable supply of a service to the farmor separate from any supply by the farmee under the agreement and that service is deemed to be consideration for the farmor’s additional contribution,

(b)   the value of that service and the value of the farmor’s additional contribution as consideration for the supply of that service are each deemed to be equal to the fair market value of the farmor’s additional contribution determined at the time (in this paragraph referred to as the “time of transfer”) that

i.  if the farmor’s additional contribution is a service, performance of the service commences, and

ii.  in any other case, ownership of the farmor’s additional contribution is transferred to the farmee,

(c)  all of the consideration for the farmor’s additional contribution and the consideration for the service deemed to have been supplied by the farmee are deemed to become due at the time of transfer, and

(d)  if, in addition to the farmee’s contribution, the farmee supplies to the farmor other property or services, other than the service deemed under subparagraph a to have been supplied, for which part of the consideration is the farmor’s additional contribution, the value of the consideration for the supply of the other property or services is deemed to be equal to the amount by which the value of that consideration, determined without reference to this subparagraph, exceeds the fair market value of the farmor’s additional contribution.

2001, c. 53, s. 282.