On March 1, 2015, the federal government announced two new tax
measures favourable to investors in junior mining exploration
companies in Canada in an effort to stabilize and strengthen the
Canadian mining industry.
First, the government has extended the 15% Mineral Exploration
Tax Credit for investors in flow-through shares for an additional
year, until March 31, 2016. Flow-through shares are an instrument
to encourage investment in Canadian mining, because they permit
resource companies to renounce or "flow through" unused
tax expenses associated with their Canadian exploration activities
to investors who can deduct the expenses in calculating their own
taxable income. The Mineral Exploration Tax Credit provides an
additional benefit to individual investors in mining flow-through
shares, equal to 15% of the specified mineral exploration expenses
incurred in Canada that were renounced by the resource companies in
favour of their flow-through share investors. With this announced
extension, specified expenses will be eligible for the 15% Mineral
Exploration Tax Credit in respect of flow-through share agreements
entered into on or before March 31, 2016.
Second, the government affirmed that costs associated with
undertaking environmental studies and community consultations that
are required in order to obtain an exploration permit are eligible
for treatment as Canadian Exploration Expenses (CEE). Under CEE
treatment, costs can be fully deductible for tax purposes by
resource companies in the year incurred, or can be renounced by the
resource companies in favour of their flow-through share investors.
In the case of eligible projects, these expenses could also qualify
for the 15% Mineral Exploration Tax Credit described above. This
measure provides further incentive to investors in the sector by
increasing the pool of deductible CEE, which already includes
expenses incurred for the purposes of determining the existence,
location, extent or quality of a mineral resource or an
accumulation of petroleum or natural gas in Canada.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
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