By: Jesse Godfrey VP, Retail Sales
Flow-through share investing is a powerful way to lower one’s tax bill given the investor has the appropriate risk tolerance and means to do so. On top of the 100% Canadian Exploration Expense (CEE) deduction, investors can also claim certain non-refundable tax credits depending on their province of residence. Certain provinces will offer these incentives for residents investing in mining projects located in their home province. For example, the province of Saskatchewan offers a non-refundable 10% tax credit to Saskatchewan taxpayers who invest in eligible flow-through shares. In Ontario, the provincial tax credit is 5% on eligible Ontario exploration expenses.
In addition to the CEE deduction and provincial tax credits, investors may also be eligible for the Mineral Exploration Tax Credit (METC), which is a federal non-refundable tax credit created to help exploration companies attract more capital. The METC is a 15% tax credit which can be carried forward up to 20 years and carried back 3 years.
As per the 2022 Federal budget, the Critical Mineral Exploration Tax Credit (CMETC) was introduced which provides investors with a 30% federal non-refundable tax credit for qualifying exploration expenses for all 31 minerals on Canada’s critical mineral list. Some examples include copper, uranium, lithium, nickel, cobalt, graphite, etc. The 30% tax credit would apply to eligible flow-through share agreements after April 7, 2022, and up until before March 31, 2027 as it currently stands. Investors claiming CMETC would not be eligible to benefit from the existing METC federal tax credit.
These 31 critical elements are essential for Canada to lead the way into the future revolution of technology, AI, and sustainability. Look for Canada to be on the forefront providing the world with materials to build cutting edge jet engines, hydrogen fuel cell batteries, semiconductors, aerospace materials, and much more. Flow-through share investing gives investors the exposure to these exciting new opportunities while lowering their net cost of investment by providing a massive tax savings.
In a world of ever-increasing taxes and many tax incentives being eliminated year after year, flow-through share investing remains a viable way for investors with the appropriate risk tolerance to advantageously support the Canadian resource sector while receiving an incentivising tax break to do so.
Please remember to always consult with a tax professional before investing in flow-through shares.
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