The Ministry of Finance hosts free information sessions to help you learn about Ontario taxes, tax credits and benefits.

Overview

A flow-through share is a type of investment. It takes place when you invest money in a corporation that agrees to spend your money on mining exploration in Ontario.

In exchange for your investment, you receive a share. This is a portion of ownership in that corporation. Once mining exploration happens, the corporation transfers its exploration expenses to you, the shareholder.

You can claim 5% of those expenses as a refundable tax credit on your personal Income Tax and Benefit Return.

The credit is intended to stimulate mineral exploration in Ontario and to improve access to capital 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're filing a return for and you purchased eligible flow-through shares from a corporation that is permanently established in Ontario after October 17, 2000.

The credit:

  • provides eligible individual shareholders of eligible flow-through shares with a refundable tax credit of 5% of eligible Ontario exploration expenses
  • harmonizes with the federal government's existing deduction and 15% investment tax credit
  • applies rules and a structure similar to the federal flow-through share (FTS) Canadian Exploration Expenses (CEE) program (some changes to federal definitions have been made)

Individuals who qualify for the federal tax credit and who purchased shares from a mining exploration company can claim the Ontario credit.

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

Eligible individual

To be eligible for the credit, an individual must meet all of the following requirements:

  • have purchased eligible flow-through shares in accordance with section 66 of the federal ITA
  • be subject to Ontario income tax for the taxation year in which the credit is being claimed
  • be an individual, other than a trust, who is resident in Ontario on the last day of the taxation year

Partnerships

An eligible individual may claim the credit either alone, 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

Estates are also eligible to claim the credit on the final return of a deceased taxpayer.

Bankruptcy

Bankruptcy returns follow the federal investment tax credit rules:

  • 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

Eligible mining exploration corporation

To be eligible for the credit, you must have purchased flow-through shares in a corporation that meets both of the following requirements:

  • Is a principal-business corporation, as defined in subsection 66 (15) of the federal ITA, whose principal business is exploring for or mining minerals.
  • Has a permanent establishment in Ontario at the time the expenditures are incurred. A "permanent establishment" is defined in subsection 1(1) of the Taxation Act, 2007.

Eligible mining exploration expenses

Eligible mining exploration expenses must result from mining exploration activities required to determine the existence, location, extent or quality of a mineral resource in Ontario. This includes:

  • environmental studies or community consultations
  • prospecting
  • geological, geophysical or geochemical surveys
  • drilling by rotary, diamond, percussion or other methods

In order to be an eligible mining exploration expense, the expense must meet all the following conditions:

  • incurred by a corporation in Ontario after October 17, 2000
  • be as described in paragraph (f) of the definition "Canadian Exploration Expense" (CEE) in subsection 66.1(6) of the federal ITA, where any reference in that paragraph to "Canada" is read as "Ontario"
  • renounced in favour of the individual (directly, or indirectly through a partnership of which the individual is a member), according to a flow-through share agreement made after October 17, 2000
  • incurred while conducting mining exploration activity from or above the surface of the earth, for determining the existence or location of a "mineral resource", described in paragraph (a) or (d), subsection 248(1) of the federal ITA

Eligible expenses include:

  • costs incurred in prospecting, carrying out geological, geophysical or geochemical surveys, drilling by rotary, diamond, percussion or other methods, trenching, or digging test pits and preliminary sampling
  • direct expenses related to labour and field supervision
  • contractor's and consultant's fees, supplies and equipment rental
  • indirect expenses, to the extent allowed as CEE, for:
    • transportation of supplies
    • shipment of samples, assays and chemical analyses of samples
    • food and lodging
    • mobilization and demobilization of equipment and crew within the Province of Ontario
    • certain overhead costs related to carrying out the project, but not head office costs
    • determining the existence, location, extent or quality of a mineral resource
    • "specified sampling", to the extent that the weight of each sample does not exceed 15 tonnes, and the total weight of all samples (other than samples that are less than one tonne in weight) collected for any one mineral resource in a calendar year, by any person or partnership or combination of persons and partnerships, does not exceed 1,000 tonnes
    • a mineral resource, as defined in section 248(1) of the federal ITA, includes a base of precious metal deposit, but does not include a coal deposit or a bituminous sands deposit or oil shale deposit

Ineligible expenses

You can't claim expenses for an existing mine, including potential or actual extensions of that mine.

The following are not considered eligible Ontario exploration expenses:

  • a Canadian development expense, as defined in subsection 66.2(5) of the federal ITA
  • an expense related to a mine that has come into production, or to a potential or actual extension of such a mine
  • a Canadian "exploration and development" overhead expense, as defined in the regulations to the ITA
  • an outlay or expense included in the capital cost of the taxpayer's depreciable property of a prescribed class
  • the cost of purchasing or leasing certain seismic data, including data acquired from a person who did not perform the work or who previously sold the data, and data which resulted from work performed more than one year before the cost was incurred
  • expenses incurred in relation to an oil or gas well
  • the taxpayer's share of any outlay or expense incurred by a partnership
  • the legal and financial costs of dealing with the financing, or other items such as property payments

Calculating the credit

The amount of the credit is 5% of exploration expenses for the tax year. It is in addition to the federal deduction of exploration and development expenses and the federal 15% mineral exploration tax credit.

The amount of the credit you receive depends on the eligible resource expenditures reported in the T101 slips.

Example

A taxpayer who makes a $1,000 investment receives a 5% Ontario credit of $50. 

This is in addition to a 15% non-refundable federal credit of $142.50  (i.e. 15% multiplied by $950, the $1,000 investment reduced by the $50 Ontario credit) and a deduction from income of $1,000. The federal credit of $142.50 and Ontario credit of $50 will be part of the next year’s total income of investors and subject to income tax. 

Claiming the credit

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

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 amount of the credit in a tax year will reduce the balance in your cumulative federal CEE pool in the year following the tax credit claim.

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:

If you file electronically

Keep all your documents in case the Canada Revenue Agency requests them at a later date.

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

Estates 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

In addition to the Ontario Focused Flow-Through Share Tax Credit, find out about Ontario benefit programs you may be eligible for, 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.