The recently released 2009 Canadian Federal Budget extended the 15% Mineral Exploration Tax Credit (the FTC) for one year to flow-through share agreements made on or before March 31, 2010.
The existing “look-back” rule allows for funds raised in one calendar year using the FTC to be applied to eligible exploration up to the end of the following calendar year. Therefore, investors who invest in flow-through share agreements can receive a tax credit of up to 15% of specified expenses renounced to investors in flowthrough shares.
The 15% FTC applies in addition to the flow-through share mechanism provided for in the Income Tax Act (Canada). The flowthrough share mechanism permits Canadian resource expenses incurred by a principal business corporation to renounce to a shareholder an amount in respect of Canadian resource expenses not exceeding the consideration received by the corporation for the issuance of the shares. Such renounced expenditures are deductible by the shareholder if they had directly incurred the expenditure.