How the flow-through share (FTS) program works
Individuals, trusts, corporations, and partnerships can invest in FTSs, but only the original investors can deduct the amounts renounced to them.
The corporation that issues the FTS must be a principal-business corporation (PBC). There must be a written flow-through share agreement between the investor and the corporation. The corporation can then renounce and "flow through" eligible exploration and development expenses to the original investors. The type of expenses a PBC can renounce are:
- Canadian exploration expenses (CEEs), which are added to the cumulative CEE (CCEE) pool and can be deducted up to the maximum of 100%; or
- Canadian development expenses (CDEs), which are added to the cumulative CDE (CCDE) pool and can be deducted up to the maximum of 30%.
FTS investors may benefit from:
- deductions from income through renounced expenses;
- an investment tax credit (ITC) on flow-through mining expenditures for individuals; and
- amounts renounced to the partnership, which can be allocated to the partners.
Individuals (excluding trusts) can claim a 15% non-refundable ITC for certain mining CEEs renounced on investments in FTSs of mineral exploration companies. The investor and the corporation must have entered into an FTS agreement on or before March 31, 2008. Under the "look-back" rule, funds raised with the benefit of the credit in 2008, for example, can be spent on eligible exploration up to the end of 2009.
The following provinces offer provincial tax credits that are similar to the federal FTS credit:
- BC Mining Flow-Through Share Tax Credit
- Manitoba Mineral Exploration Tax Credit (MMETC)
- Ontario Focused Flow-Through Share Tax Credit
- Saskatchewan Mineral Exploration Tax Credit ended December 31, 2005.
- Quebec - Flow-through shares and Issuing Flow-through shares (available in French only)
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