Ontario Focused Flow-Through Share Tax Credit

Overview

A flow-through share is an investment in an Ontario mining exploration company. The company agrees to use your investment for mining exploration in Ontario.

In exchange for your investment, you receive shares in the company, giving you partial ownership. Once the company completes qualifying mining exploration, the corporation renounces some of its eligible exploration expenses to you, the shareholder. You can claim these expenses on your Income Tax and Benefit Return to reduce your taxable income.

You can also claim 5% of Ontario mineral mining exploration expenses and 5% of Ontario critical mineral mining exploration expenses as a refundable tax credit on your personal Income Tax and Benefit Return.

This credit is intended to encourage mineral exploration and to provide support for  small mining exploration companies.

Eligibility

You qualify for the credit if:

• you lived in Ontario on the last day of the tax year
• you purchased eligible flow-through shares during that year
• the shares were issued by a qualifying Ontario mining exploration company that carried out qualifying mineral exploration activities in Ontario

The federal government also offers personal income tax credits related to mineral exploration in Canada.

If you qualify for the federal tax credits and purchased shares from an Ontario mining exploration company that carried out mineral exploration activities in Ontario, you can claim the Ontario credit.

Trusts, corporations, and corporate partners, cannot claim the credit.

Partnerships

You can claim the credit on your own or as a member of a partnership. A partner's share of expenses under a flow-through share agreement is the amount incurred by the partner at the end of the fiscal year of the partnership.

Estates

An estate can claim the credit on a deceased person's final tax return.

Bankruptcy

Federal investment tax credit rules apply if you were bankrupt:

• pre-bankruptcy returns are allowable
• in-bankruptcy returns are not allowable
• returns for a calendar year are not eligible if the individual was bankrupt at any time in the year

Calculating the credit

The credit equals the total of:

• 5% of eligible Ontario mineral mining exploration expenses
• 5% of eligible Ontario critical mineral mining exploration expenses

It is in addition to the federal deduction of exploration and development expenses and the personal federal tax credits related to mineral exploration.

The amount you receive depends on the eligible resource expenses reported in the T101 slip(s) issued by the mining exploration company(ies).

Example 1

If you purchase $1,000 in flow-through shares in an eligible mining exploration company conducting Ontario mineral exploration, you can claim a 5% Ontario credit of $50. 

You may also qualify for a federal non-refundable tax credit of $142.50 and claim a $1,000 deduction from your income. The federal credit is calculated using the $1,000 investment minus the $50 Ontario credit ($950 × 15% = $142.50).

You must include the $50 Ontario credit and the $142.50 federal credit in your income when you file your tax return for the following year. These amounts are subject to income tax.

Example 2

If you purchase $1,000 in flow-through shares in an eligible mining exploration company conducting Ontario mineral exploration and another $2,000 in flow-through shares in an eligible mining exploration company conducting Ontario critical mineral exploration, you can claim an Ontario credit of $150:

• $50 from the $1,000 investment, and
• $100 from the $2,000 investment

This is in addition to the applicable federal credits and deduction from income. The federal and Ontario credit received must be included in your total income for the following tax year and is subject to income tax.

Claiming the credit

To get this credit, file your Personal Income Tax and Benefit return, even if you do not have any income to report, along with:

• the Ontario Credits form (ON479)
• the Ontario Focused Flow-Through Share Resource Expenses (Individuals) form (T1221)

The credit is used to reduce the Ontario tax you owe. If your credit is more than the amount of tax you owe, the remainder will be paid to you as a tax refund after your return is assessed.

The credit will reduce the balance in your cumulative Canadian Exploration Expense (CEE) pool in the following tax year.

If you file a paper return

Attach the credit certification documents you received from the mining exploration company that issued the flow-through shares and had qualifying expenses in Ontario that it renounced to you. Your certification documents should include either a:

• Statement of Partnership Income (T5013)
• Statement of Resource Expenses (T101)

If you file electronically

Keep all your documents in case the Canada Revenue Agency asks for them later.

You can claim the credit either alone or as a member of a partnership (a single business where two or more people share ownership).

An estate can claim the credit on a deceased person's final return.

Learn more about how to file your tax return.

Objections

You should contact the Canada Revenue Agency if you:

• did not receive a credit to which you believe you are entitled
• received less than expected
• are asked to repay a credit under an assessment or reassessment made by the federal government

You can make a formal objection to the Canada Revenue Agency by following the process set out in its Notice of Assessment or Reassessment.

Other tax credits and benefits

You may also be eligible for other Ontario benefit programs. Find out more about Ontario benefit programs or calculate your tax credits.

You can also visit the Canada Revenue Agency site for more information on credits and benefits, or call Toll-free: 1-877-627-6645.