VIEWS: 6 PAGES: 2 POSTED ON: 8/17/2012
Super Flow-through Shares WhAT’S NEW FOR INVESTORS: You may now invest in qualifying super After-Tax Cost of a $1,000 Investment by an Individual Investor by Province in 2011 flow-through shares – extended until March 31, 2012. (based on existing and proposed legislation, as well as administrative positions, as of September 30, 2011) FOR ISSUERS: Funds raised with the credit can support eligible exploration until the end of 2013. B.C. Nova New Northwest Nfld. & Notes Quebec Manitoba (Note 7) Scotia Sask. Ontario P.E.I. Brunswick Territories Yukon Labrador Nunavut Alta. Combined federal/provincial tax rate A 48.22% 46.40% 43.70% 50.00% 44.00% 46.41% 47.37% 43.30% 43.05% 42.40% 42.30% 40.50% 39.00% Super Federal tax rate B 24.22% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% 29.00% Provincial tax rate C 24.00% 17.40% 14.70% 21.00% 15.00% 17.41% 18.37% 14.30% 14.05% 13.40% 13.30% 11.50% 10.00% Federal tax credit D 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% Flow- Provincial tax credit E - 30% 20% - 10% 5% - - - - - - - through Amount of investment F $ 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 ShareS Less: tax benefit of deduction of flow-through investment – federal FxB (242) (290) (290) (290) (290) (290) (290) (290) (290) (290) (290) (290) (290) Mineral exploration Less: tax benefit of deduction of flow-through investment – provincial (1) FxC (360) (174) (147) (210) (150) (174) (184) (143) (141) (134) (133) (115) (100) subtotal (602) (464) (437) (500) (440) (464) (474) (433) (431) (424) (423) (405) (390) tax Credit [MetC] Less: 15% non-refundable federal investment tax credit (2) G=Fx(1-E)xD (150) (105) (120) (150) (135) (143) (150) (150) (150) (150) (150) (150) (150) Less: provincial tax credit (3) H=ExF - (300) (200) - (100) (50) - - - - - - - Add: income tax on inclusion of federal tax credit (4) GxA 36 50 52 75 59 66 71 65 65 64 63 61 59 Add: income tax on inclusion of provincial tax credit HxA - 139 87 - 44 23 - - - - - - - (716) (680) (618) (575) (572) (568) (553) (518) (516) (510) (510) (494) (481) • What they are • What they mean for investors Net cost of $1,000 investment in flow-through shares (5),(6) $ 284 320 382 425 428 432 447 482 484 490 490 506 519 The Mineral Exploration Tax Credit program is a boon to Canada’s economy. Since its introduction in October 2000, the federal tax credit program has helped keep Notes Assumptions investment in Canada and has provided an incentive for Canadian investors to put money into one of this (1) The province of Quebec deduction is 150%. (6) Alternative minimum tax is ignored in this analysis. • Taxpayers are subject to income taxes at top marginal rates. country’s most important resource industries. (2) The federal government allows a credit of 15% of qualifying (7) The British Columbia credit applies until the end of 2014 • Canadian exploration expenses are 100% eligible for federal The METC has helped Canada capture and maintain expenditures incurred (or deemed incurred under the (using the “look-back” rule). and provincial tax credits. its position as the number one country in the world “look-back” rule) before January 1, 2013. However, flow- • Available tax deductions are taken in full. for mineral exploration spending. through share subscription agreements must be signed • Exploration expenditures are made in the applicable province before April 1, 2012. and the taxpayer is a resident of that province for tax purposes. (3) Provincial tax credits reduce the amount of expenditures qualifying for the federal tax credit. (4) In the case of Quebec, the formula is “GxB” since the federal investment tax credit is not taxed in Quebec. (5) Capital gains tax applicable when the shares are sold is ignored in this analysis. October 2011 For taxpayers Flow-through shares are: at the highest marginal tax rate: • The federal 15% non-refundable tax Facts for investors: Discoveries made with the credit, when added to the regular and ongoing 100% deduction, is equivalent Income tax benefits to individual investors will vary, assistance of flow- a type of common share that permits the initial purchaser to a 137% exploration expense deduction for federal tax purposes. depending on the taxpayer’s jurisdiction of residence Flow-through tax incentives work through financing: to claim a deduction up to the amount of the share and marginal tax rate for income tax purposes. DIAMONDS at Lac de Gras, NWT, Canada has ranked number one in the world for mineral Ekati and Diavik diamond mines subscription price against any income in respect of resource at present, Quebec offers the largest potential tax exploration spending since 2002, according to the Metals expenses renounced by a publicly-traded issuer. savings for flow-through share investments, followed Economics Group (MEG). In 2010, 19% of total world exploration GOLD at hemlo, ON, Golden Giant mine there are two types of flow-through share investments: by Manitoba. expenditures were for projects in Canada. The flow-through NICkEL/COPPER at Voisey’s Bay, NL, share program and the Mineral Exploration Tax Credit are unique Diamond Fields Resources REGULAR – 100% deduction write-off for exploration The deductions and tax credits apply only to eligible (net of federal and provincial credits) additional provincial expenditures in the applicable province and territory to Canada and encourage investors and companies to focus on Canadian-based projects. hEAVY RARE EARThS at Thor Lake, NWT, Avalon Rare Metals SUPER – as above, plus an additional 15% federal tax credits for grassroots exploration tax incentives and are only available to taxpayers residing within, or otherwise taxable in, the jurisdiction where the GOLD at Malarctic, QC, Osisko Mining GOLD at Timmins, ON, Lake Shore Gold exploration is taking place. …plus provincial and territorial deductions and tax credits British Columbia, Saskatchewan, Manitoba and Ontario offer additional tax credits that apply to the provincial Tax deductions vs tax credits Features of the 15% URANIUM in the Athabaska Basin, Sk, Hathor Exploration portion of income tax relating to eligible expenses. under tax legislation governing flow-through shares, federal Mineral The effect of these incentives varies depending on the jurisdiction as shown on the accompanying table. eligible exploration expenditures have been 100% deductible from income from any source for more exploration than two decades. these deductions effectively reduce or shelter before-tax income. tax credits tax Credit apply directly to reduce taxes payable. British Columbia (20%), Saskatchewan (10%), • A non-refundable tax credit reduces taxes to the Super Flow-throughs: Manitoba (30%), and ontario (5%) offer extent of taxes payable. harmonizing tax credits. the ontario tax credits are For investors: • A refundable tax credit reduces taxes payable and refundable; the other tax credits are non-refundable. • Allows unused tax credits to be carried back then, if there is an excess, results in a cash refund. the British Columbia credits apply even after the proposed three years or forward 20 years federal deadline. the federal tax credit is non-refundable (the taxpayer • Is available the year the investment is made has to pay taxes in order to use the claim). however, For further information contact Quebec allows a deduction to investors of up to 150% Super Flow-through of the cost of certain qualifying exploration expenses in it can be carried back and applied against taxes paid in the previous three years. unused tax credits may • Is non-refundable (reduces tax payable but no cash refund) Philip Bousquet Senior Program Director, continues certain locations for provincial tax purposes. also be carried forward for a period of twenty years. • Is taxable in the year following the claim Regulatory Affairs Most taxpayers can deduct the full amount of Prospectors & Developers the federal government has again extended the super For companies issuing flow-through shares: Association of Canada flow-through tax credit, a 15% non-refundable tax credit renounced expenses in the year incurred, but the tax • Expenses eligible for the tax credit are more 135 King St. East applicable to eligible grassroots exploration in Canada. credits claimed are effectively taxed as income in the restricted than those for regular flow-through Toronto, ON M5C 1G6 the credit is deductible from federal income taxes payable following year. For example, an investor resident in and is in addition to the existing 100% deduction of eligible B.C. would add $320, being $200 (provincial) and share issues Tel: 416-362-1969 Ext. 230 exploration expenditures through the regular flow-through. Fax: 416-362-0101 $120 (federal) in 2012 for every eligible $1,000 • Can be applied under the current program under proposed legislation (Bill C-13), an investor Email: firstname.lastname@example.org invested in 2011. to eligible expenditures incurred by must subscribe for the flow-through shares before april 1, December 31, 2013 Visit our website at 2012 to be eligible for the super flow-through tax credit. www.pdac.ca for further details In addition, the issuer of the shares, if it qualifies for the “look-back rules”, must spend the proceeds on qualifying Printed on recycled paper exploration activities before January 1, 2014.
Pages to are hidden for
"flow-through-brochure"Please download to view full document