CANADA Extractive Sector Transparency Measures Act now in effect

Representing global leadership in corporate governance and poverty reduction, Canada’s Extractive Sector Transparency Measures Act (the Act) has now come into force, requiring all companies subject to the Act to report payments, including taxes, royalties, fees and production entitlements, of $100,000 or more to all levels of governments, both foreign and domestic.

The first annual report under the Act will be for the fiscal year ending after June 1, 2016, with reporting due 150 days after the end of each fiscal year.


On October 23, 2014, the Government of Canada introduced the long anticipated Extractive Sector Transparency Measures Act (the Act), which will require extractive sector companies to report payments made to governments, both foreign and domestic, including Aboriginal groups. Such reporting will be available for public access, similar to other documents filed by Canadian publicly listed entities. The events leading up to the Act being introduced, including the development and proposal of the recommendations of the Resource Revenue Transparency Working Group on which the Act is partially based.

1: What Companies Will Be Impacted?

The intention of the Act is to include all companies that are engaged in the extractive sector, defined as the commercial development of oil, gas or minerals, in Canada or abroad, with the exception of smaller, private companies. Specifically, this includes:

(a) entities that are listed on a stock exchange in Canada;

(b) entities that have a place of business in Canada, do business in Canada or have assets in Canada and meet at least two of the following conditions, based on consolidated figures, for at least one of its two most recent financial years:

i) have at least $20 million in assets;

ii) have generated at least $40 million in revenue;

iii) employ an average of at least 250 employees; and

(c) any other prescribed entities.

Encompassed in the above are companies that control a corporation or a trust, partnership or other unincorporated organization engaged in the extractive sector in Canada or abroad.

It is important to understand that the Act impacts not only Canadian-based companies, but also non-Canadian companies with subsidiaries within Canada that meet the above criteria. This being the case, foreign extractive sector companies with significant operations within Canada will be required to report their worldwide payments to governments that fall within the scope of the Act.

2: How Will Companies Operating In Multiple Reporting Jurisdictions Be Treated?

The United States and the European Union are both currently in the process of implementing similar regulations. The Act is intended to be consistent with those regulations in order to avoid duplication of reporting requirements in multiple jurisdictions. The Government of Canada is currently working with the United States and the EU to develop a common reporting template that may be utilized by companies reporting across jurisdictions, thereby reducing the administrative burden of complying with multiple regulations.

The Act further contemplates that the reporting requirements to be imposed by the United States and/or the EU may be sufficient for the purposes of the Act and thus the reporting prepared for those jurisdictions may be suitable for submission to the Canadian authorities.

3: What Will Need To Be Reported?

Companies will need to disclose any payments within a category of payment that are made to the same payee, including all levels of government, if the total amount of those payments during the financial year is at least the amount prescribed by regulation for the category of payment; or if no amount is prescribed for the category, $100,000. These categories of payment have yet to be created. The following types of payments, whether monetary or in kind, must be reported:

(a) taxes, other than consumption taxes and personal income taxes;

(b) royalties;

(c) fees, including rental fees, entry fees and regulatory charges as well as fees or other consideration for licenses, permits or concessions;

(d) production entitlements;

(e) bonuses, including signature, discovery and production bonuses;

(f) dividends other than dividends paid as ordinary shareholders;

(g) infrastructure improvement payments; or

(h) any other prescribed category of payment.

4: What Measures Apply To Ensure Complete And Accurate Reporting?

The Act allows the Government of Canada to request access to a wide range of documentation for purposes of verification of reported information, similar to how a company may be audited by the Canada Revenue Agency for taxation purposes. Through such a process, a company may be requested to produce a list of projects in which the entity has an interest and the nature of that interest; an explanation of how the entity has treated a payment for the purpose of preparing its report; a summary of any policies the Company has implemented for purposes of meeting its obligations under the Act; and the results of an audit of the report or of the records of payments for the financial year to which the report relates, with such an audit being carried out by an independent auditor in accordance with generally accepted auditing standards.


Should a company fail to comply with the requirements of the Act, the Government of Canada may impose corrective measures and impose a penalty of up to CAD$250,000.