What is a flow-through share offering?
What is a flow-through share offering?
Flow-through shares are like any other common share issued by a company, except they also provide tax benefits to the purchaser. A flow-through share is available to mining, petroleum and certain types of renewable energy companies to facilitate financing their exploration and project development activities.
How risky are flow-through shares?
Are there risks? Once you purchase the flow-through shares and have taken the CEE deduction, you are relying on the company to spend the money correctly. If the total sum of the investment is not spent on exploration within the 24 months, you may be retroactively denied the CEE deduction.
How long do you have to hold flow-through shares?
2 years
Holding period – Flow-through shares have a holding period of up to 2 years. You can’t get your money out during this period, no matter how the company is doing or what you need the money for.
What special rule applies to the ACB of flow-through shares?
It’s important to note that the adjusted cost base (ACB) of a flow- through share is deemed to be zero. This means that when you eventually sell your shares, the sale proceeds will be taxed as a capital gain.
What is a flow-through basis?
Flow-through basis. An account for an investment credit to show all income statement benefits of the credit in the year of acquisition, rather than spreading them over the life of the asset.
What is flow-through funding?
A flow-through share (FTS) is a tax-based financing incentive that is available to, among others, the mining sector. The corporation “renounces” to the taxpayer an amount in respect of the expenditures so that the exploration and development expenses are considered to be the taxpayer’s expenses for tax purposes.
What is CEE and CDE?
Canadian resource companies are permitted to fully deduct specific exploration and development expenses, known as Canadian Exploration Expense (CEE) and Canadian Development Expense (CDE).
How do you calculate profit flow?
Flow-through determines what percentage of incremental revenue results in incremental profit. Flow-through = (Current period revenue – Previous period revenue) / (Current period operating profit – previous period operating profit).
What is a T101 slip?
Instructions. Complete a T101 slip for each person who owns flow-through shares for which a renunciation of Canadian resource expenses, an adjustment to an amount previously renounced or an allocation of assistance has been made.
What is Flow Thru on a P&L?
Flow-through determines what percentage of incremental revenue results in incremental profit. Flow-through = (Current period revenue – Previous period revenue) / (Current period operating profit – previous period operating profit). This metric can also be applied to other profitability measures like EBITDA.
What is pass through tax treatment?
Pass-through taxation refers to the fact that a pass-through business pays no taxes. Instead, some control person pays the business’s taxes through that person’s own personal tax return.
What is a flow-through cost?
Definition of “Flow-through cost (no load insurance)” Net cost of insurance with no markup to cover an intermediary’s profit or expenses. An intermediary, such as a broker, sells an insurance product net; that is, there is no loading for his own cost of soliciting business or his profit margin.
What are flow-through shares?
Flow-through shares are used in the Canadian mining and energy sectors. If you’re investing in mining or oil and gas companies in Canada, you’re likely to come across the term. What you need to know about Flow-through shares.
Are flow-through shares counted under IFRS?
While IFRS does not specifically address accounting for flow-through shares, Viewpoints: Applying IFRS in the Oil and Gas Industry: Flow-Through Shares discusses how an entity could account for flow-through shares under IFRS.
What are the changes to the flow-through share issuers in Canada?
On July 10, 2020, the Government of Canada announced changes to protect jobs and safe operations of junior mining exploration and other flow-through share issuers, by extending the timelines for spending the capital they raise via flow-through shares by 12 months.
How much can you save with flow-through shares in Ontario?
For example, assuming you are in the top tax bracket in Ontario (53.53%), if you bought $10,000 in flow-through shares, you would have a tax savings of $5,353. However, you need to be aware that the cost base of the shares is reduced by the deduction you have claimed.
