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Canada Extends Mineral Exploration Tax Credit

by Mike Godfrey, Tax-news.com, Washington

06 March 2017


The Canadian Government has announced that it will extend the 15 percent Mineral Exploration Tax Credit for investors in flow-through shares for an additional year.

The credit was scheduled to expire on March 31, 2017. The Government has proposed to extend eligibility to flow-through share agreements entered into on or before March 31, 2018.

Under the existing look-back rule, funds raised in one calendar year with the benefit of the credit can be spent on eligible exploration up to the end of the following calendar year. Funds raised with the credit during the first three months of 2018 can therefore support eligible exploration until the end of 2019.

Flow-through shares allow resource companies to renounce or "flow through" 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 income tax benefit for individuals who invest in mining flow-through shares, which is intended to augment the tax benefits associated with the deductions that are flowed through.

The credit is equal to 15 percent of specified mineral exploration expenses incurred in Canada and renounced to flow-through share investors.

The Government estimates that extending the credit will help junior exploration companies to raise more equity and result in a net tax reduction of CAD30m (USD22.4m) over the 2017-18 to 2018-19 period.

Jim Carr, Minister of Natural Resources, said: "By extending the Mineral Exploration Tax Credit, our Government is supporting an industry that is increasingly recognized for its innovation and sustainability on the ground here in Canada. Mining in Canada is an essential economic driver and source of good middle class jobs, including in remote communities across Canada."

TAGS: individuals | tax | tax incentives | mining | tax credits | agreements | Canada

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