Tired of Paying too much taxes?…Investing in flow-through shares may be the answer.
To promote mining, exploration and development of Canadian natural resources, the federal government has made available attractive tax deductions and tax credits for investments in this sector. Junior mining companies are able to issue common shares that entitle the investor to these deductions and tax credits. These shares are called Flow-Through Shares.
Flow-through shares permits the investor to claim a deduction up to the amount of the investment against any income – essentially providing the investor with a 100% deduction. In addition, to the 100% deduction, there are additional provincial and territorial deductions and tax credits. Special Flow-Through Shares, called Super Flow-Through shares, offer an additional 15% federal tax credit for grassroots exploration. For taxpayers at the highest marginal tax rate, the federal government 15% non-refundable tax credit, when added to the regular 100% deduction, is equivalent to a 137% exploration expense deduction for federal tax purposes.
These special Super Flow Through shares are set to expire on March 31st, 2011 – so there is a limited opportunity to take advantage of this great tax sheltering investment. In addition, the Ontario government offers a refundable 5% tax credit. Tax credits are applied directly to reduce taxes payable. A non-refundable tax credit reduces taxes to the maximum of the taxes payable while a refundable tax credit reduces taxes payable and then, if there is an excess, results in a cash refund! These tax credits can be carried back and applied against taxes paid in the previous three years and carried forward for a period of ten years. Any tax credits claimed are taxable in the following year.
Flow through shares are not for everyone, talk to your financial advisor for more details on the benefits of Flow through shares. For high income earners, the tax savings are enormous.
Perry Wong is a chartered accountant specializing in tax advantaged investment strategies.
He is the President of Forest Hill Lions Club and the Director of Hospitality for the North American
Association of Asian Professionals. He is often featured in television and radio programs for his
financial advice. You can reach him at anytime at 416.999.7011