Table of Contents Contents
Eligibility For The Tax Credit
In Ontario, flow-through shares are a type of investment where the funds raised are used to generate significant exploration activity. These investments are in corporations that agree to spend your money on mining and mining exploration in Ontario. In return, you get a share. This means you get part ownership, and they transfer the resource expenses of exploration expenditures conducted to you.
In return, you can claim a portion of these fees paid on your annual income tax return. Some people refer to this as flow-through share financing since it’s meant to provide funds to stimulate mining exploration.
In order to be eligible for the credit, you have to purchase eligible shares from public companies that were permanently established in Ontario after October 17, 2000. You also have to have purchased eligible shares in accordance with Section 66 of the federal ITA. You must also be a resident of Ontario on the last day of the tax year. You must also be subject to Ontario income tax on the year that you claim.
Tax Credit Amounts
The purpose of the Ontario Focused Flow-Through Tax Credit is to help increase mining exploration in Ontario with small mining exploration companies. Eligible individual shareholders who invest in a share of a mining exploration company, which can be found on Canadian stock exchanges, are able to claim 5% of these expenses on their annual income tax and benefit return.
The amount is different for everyone and is calculated based on the total amount you’re claiming. These are claimed in the form of a refundable tax credit. That said, you can only claim eligible Ontario exploration expenses. With these deductions, the Alternative Minimum Tax method is used to calculate the tax deduction as well as the tax payable. It’s also used for other credits and amounts, such as capital gains.
Eligible Expenses
When it comes to expenses, there are both eligible mining expiration expenses and eligible expenses for exploration on Canadian soil in Ontario. Here’s what is as qualifying expenses.
- Environmental studies
- Community consultations
- Prospecting
- Geological, geophysical, and geochemical surveys
- Drilling
- Contractors and consultant fees
- Supplies
- Equipment rentals
- Direct expenses related to labour and field supervision
- Transportation of supplies
- Shipments of samples
- Food and lodging
- Mobilization and demobilization of equipment
- Certain costs related to the project
- Specified sampling
- Determining where a mineral source is
Ineligible Expenses
While there are certain exploration expenditures that are allowed to be claimed under this credit, there are also expenses that are ineligible. These include expenses for an existing mine as well as extensions of the current mine. Other expenses that you can’t claim include:
- Canadian development expenses, as defined in subsection 66,2(5) in the ITA
- Expenses related to an oil or gas well
- Expenses related to a mine that has come into production
- An exploration and development overhead expense
- Expenses included in the Cost Capital of the taxpayer's depreciable property
- The cost of seismic data
- The taxpayers share an outlay or expense from the partnership
- The costs of dealing with financing
Ontario Opportunities Fund Tax Credit
Another one of many Ontario tax credits that you can claim is the Ontario Opportunities Funds Tax Credit. If you donate to the Ontario Opportunities Funds, which reduces the amount of the province's debt, then you can claim your contributions as long as they’re over $2; this is claimed as a non-refundable tax credit.
If you wish to donate to this fund, you can do so by redirecting any funds from your tax return. You can also send the funds through a cheque to the Ontario provincial government. If you did make a donation, then you will be sent a tax receipt in February to claim the tax credit. It’s important to note that you don’t have to claim it for the current tax year, either. You can also have the amounts carried forward up to 5 years in the future.
How Flow-Through Shares Work
Unlike traditional stocks, flow-through shares allow companies to sell their shares at a higher price to be used as a financing source. These are then used to make money for exploration and development. Investors can then claim these amounts on their taxes to reduce the total amount that they owe.
How Charity Flow-Through Shares Work
Charity flow-through shares are actually very similar to regular flow-through shares. They’re purchased the same as traditional shares, but instead of the investor keeping the shares, they donate them to charity. However, because you’re donating the purchased Flow-Through Shares, you, as the initial purchaser, can also claim the additional incentive of the Charitable Donation Tax Credit.
CMETC
CMETC stands for the Critical Mineral Exploration Tax Credit. This is similar to the provincial credit, except it's a federal tax credit through the Canada Revenue Agency that helps reduce the tax on your taxable income. What you can claim and the eligibility requirements you need to meet are a little bit different. The idea behind this credit is to provide investors that invest in companies that are exploring for critical materials. This credit, through the Income Tax Act, allows for a 30% tax credit, while the Mineral Exploration Tax Credit only allows for 15%.
In order to claim this credit, not only do the expenses have to be eligible, but you also have to submit a CMETC certification form. This form requires a professional engineer or geoscientist to certify the issuances. It’s only two pages long and very simple to fill out.
This is a relatively new credit and was only proposed in the 2022 federal budget. In order to qualify, you have to invest in shares between April 2022 and April 2027. It’s also targeted in specific minerals, including:
- Nickel
- Lithium
- Cobalt
- Graphite
- Copper
- Rare Earth’s Elements
- Vanadium
- Tellurium
- Gallium
- Scandium
- Titanium
- Magnesium
- Zinc
- Platinum Group Metals
- Uranium
The great thing about this credit is that you can claim it alongside the Ontario credit. This means you have more than one tax incentive when purchasing these flow-through shares. If you donate to them, you can also claim the Charitable Donation Tax Credit. This could potentially allow you to make 3 tax credit claims for your shares.
Mineral Exploration Tax Credit
The Mineral Exploration Tax Credit, through the federal government, is the tax credit that came before the Critical Mineral Exploration Tax Credit. With this credit, you could claim 15% back with eligible flow-through shares instead of 30% with the CMETC. In 2021, the METC supported over 300 companies. They did this by administering shares to over 1200 investors. It’s still available for those who don’t qualify for the CMETC.
Ontario Trillium Benefit and Who Gets It
Another tax credit that’s only available to moderate-income individuals in Ontario is the Ontario Trillium Benefit. This benefit is made up of three different Ontario credits, and you only need to qualify for one to receive it. Here is how each one works.
Northern Ontario Energy Credit
Since parts of Northern Ontario have higher energy costs, this credit is used to combat that. However, you do have to live in one of these towns in order to qualify.
- Algoma
- Cochrane
- Kenora
- Manitoulin
- Nipissing
- Parry Sound
- Rainy River
- Sudbury
- Thunder Bay
- Timiskaming
You must also be at least 18 years old, have or had a spouse or common-law partner, or be a parent who lives or lived with a child. You must also have paid rent or property taxes for your main residence, live on a reserve while paying for your home energy costs, or lived in a public long-term care facility.
Receiving this credit depends on where you live on the first of the month, not your annual income tax return. The amounts you’ll receive are up to $185 for a single person and up to $285 for a family.
Ontario Energy and Property Tax Credit
This credit is also a tax-free payment and is designed to help with property tax payments as well as energy costs. In order to qualify you do have to have lived in Ontario as of December 31, 2024. You also must also be at least 18 years old, have or had a spouse or common-law partner, or be a parent who lives or lived with a child. You must also have paid rent or property taxes for your main residence, live on a reserve while paying for your home energy costs, or lived in a public long-term care facility.
The amounts for this credit are a bit different. Those who are between the ages of 18 and 64 can receive up to $1,283. Those who are 65 and older can receive up to $1,461. Those who lived on a reserve or in a public long-term care home can get up to $285, and you can also get $25 for the time you lived at a designated college, university or private school.
Ontario Sales Tax Credit
In order to help with the cost of sales tax in Ontario there’s the Ontario Sales Tax Credit. In order to qualify for this you must be at least 19 years old, have or had a spouse or common-law partner, or be a parent who lives or lived with a child.
Like many of the other payments, this payment will not affect the GST/HST amounts that you receive. In terms of the credit, you can get up to $371. You can also get $371 for your spouse or common-law partner as well as eligible children who are under 18 years of age on the first of the month.
Final Thoughts
The Ontario Focused Flow-Through Tax Credit is just one of the many tax credits that taxpayers in Ontario can qualify for. However, you do have to have purchased a flow-through share that qualifies and meets the requirements. You can also be approved for government tax credits as well ranging between 15% and 30%. If you donate it to charity, you can also claim the Charitable Donation Tax Credit.
If you don’t qualify for this tax credit, don’t worry because there are lots of other tax credit options that you could be eligible for. One of the most popular is the Ontario Trillium Benefit. This credit consists of more than one tax credit and covers a good portion of Ontario residents.
