Flow-through Shares

Current Flow-through Offerings

Flow-Through Offerings

What are Flow-Through Shares?

Mining stocks and oil & gas Flow-through limited partnerships provide an opportunity for Canadian investors to participate in the resource sector while enjoying significant tax benefits. A partnership invests exclusively in the Flow-through shares of Canadian resource companies.

Flow-through shares are common shares of Canadian resource companies issued to finance the exploration and development of resource properties. To encourage investment by these companies, the federal government allows exploration and development expenses incurred to be "flowed-through" to investors and deducted for tax purposes.

Eligible exploration expenditures have been 100% deductible from income from any source for at least two decades. These deductions effectively reduce or shelter before-tax income. Tax credits apply directly to reduce taxes payable.

The federal tax credit is non-refundable (the taxpayer has to pay taxes in order to use the claim). However, it can be carried back and applied against taxes paid in the previous three years. Unused tax credits may also be carried forward for a period of ten years.

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Flow-Through Share Risks

It is important to assess the risks of any company. Just because tax deductions are being offered does not make it a good investment. If you are considering investing in flow-through shares, ask the company:

  • If it qualifies as a Principal-Business Corporation (PBC). Only a PBC can offer flow-through shares. Visit the Canada Revenue Agency for a full definition.
  • If the property is located in Canada. Only Canadian properties can offer flow-through shares.
  • For the eight-digit Tax Identification Number and the copy of the letter from the CRA confirming the number

View our Oil & Gas and Mining equity research pages to learn more about the opportunities for investing in Flow-through shares.

3 Pitfalls to Avoid When Investing in Flow-Through.

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