Flow-Through Shares

 

What is a Flow-Through Share?

Flow-through shares are common shares of a resource company which provide flow-through tax deductions to investors.

Resource companies issue flow-through shares to attract capital for exploration and development. Resource companies “flow through” eligible Canadian Exploration Expenses (CEE) and Canadian Development Expenses (CDE) to their flow-through share investors. Shareholders can deduct these flow- through expenses against their taxable income.

 

What are the Tax Benefits?

From a tax deduction perspective, the investor receives the same tax benefit as making an RRSP contribution, but the difference is that flow-through investment is purchased and held outside a registered plan.

 

How can individual investors purchase a flow-through investment?

Flow-through investments can be purchased in one of two ways:

1. Purchase flow- through shares directly from a resource company

2.Purchase a flow-through limited partnership

 

 Flow-Through Share Illustration

 

Flow-Through Tax Incentives Work

Canada has been the second favorite region for mineral exploration for the past decade, and continued to take advantage of its large pool of junior explorers and exploration-focused tax incentives to attract 18% of the total global expenditures in 2011, according to Metals Economics Group (MEG). Three provinces — Ontario, Quebec, and British Columbia — accounted for more than 60% of the planned Canadian nonferrous exploration spending.