The Canadian federal government announced two new tax measures to support the Canadian mining industry on March 1, 2015.
Extension of Mineral Exploration Tax Credit
The government proposes to extend the Mineral Exploration Tax Credit (METC) available to individual investors in flow-through shares for an additional year. Under the proposal, the METC, which was previously scheduled to expire on March 31, 2015, will be available to individuals who subscribe for flow-through shares pursuant to agreements entered into on or before March 31, 2016. The METC generally provides such individuals with a tax credit equal to 15% of certain specified mineral exploration expenses that are incurred in Canada and renounced to flow-through share investors. The extension of the METC for one year is consistent with prior federal budgets, and presumably this announcement was made on March 1, 2015, outside of the budget context because the METC would otherwise expire before the release of the 2015 federal budget (which has been delayed until at least April).
Expansion of qualifying Canadian Exploration Expenses
The government also announced a proposal which would provide that costs associated with undertaking environmental studies and community consultations that are required in order to obtain an exploration permit or licence will now be eligible for treatment as Canadian Exploration Expenses (CEE). Prior to this proposal, in certain circumstances such costs may have been treated as part of the cost of the exploration permit or licence, rather than qualifying for CEE treatment. As CEE, the costs would generally be 100% deductible to resource companies in the year incurred and would be eligible to be renounced to investors in flow-through shares and will qualify for the METC where the environmental studies and community consultations are related to qualifying exploration projects.