British Columbia's latest budget, introduced on Feb. 17,
2015, confirmed two measures intended to support B.C.'s mining
industry, including an extension of the B.C. mining flow-through
share tax credit.
Flow-through shares are designed to help corporations in the
mining, oil and gas, and renewable energy sectors finance their
exploration and development activities. Junior resource
corporations generally benefit the most from the use of
flow-through shares since those corporations typically have the
most difficulty financing their activities.
A qualifying issuer corporation may transfer certain resource
expenses to investors using the flow-through share mechanism. This
allows an investor in flow-through shares to benefit from several
tax incentives. For example, the investor may deduct qualifying
resource expenses renounced by the issuing corporation in computing
the investor's income. As well, individual investors
(excluding trusts) may be entitled to federal investment tax
credits for resource expenses which qualify as flow-through mining
expenditures. Further, some provinces, including British Columbia,
provide supplementary provincial investment tax credits for
qualifying resource expenses.
British Columbia's tax incentive for qualifying resource
expenses is in the form of the B.C. mining flow-through share tax
credit. That tax credit expires periodically. The existing tax
credit only applies to expenditures that were incurred by the end
of 2014. The B.C. government has been extending this tax credit
periodically, and many corporations have come to depend on these
B.C.'s Premier recently announced that the government would
extend the B.C. mining flow-through share tax credit to the end of
2015, and this extension was just confirmed in the B.C. budget. The
extension will help resource companies raise funds by allowing them
to offer the additional B.C. tax credit to qualifying investors in
2015. Given the importance of the mining sector in British
Columbia, this extension will be as welcome as it was
In its budget, the B.C. government also extended the new mine
allowance through to Dec. 31, 2019. The new mine allowance allows
an additional deduction for development costs in a new mine for
purposes of calculating the B.C. mineral tax. In total, a 133%
deduction of certain capital costs is permitted for new mines in
determining the mineral tax. This special deduction helps
support the development of new mines and major expansions.
Since mining companies are facing tough times, any measures
which facilitate financing or reduce taxes will no doubt be welcome
news to this sector.
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