A flow-through share is a tax-advantaged investment in the common shares of a Canadian company in the natural resource or renewable energy sector.
A company that issues flow-through shares renounces or “flows through” to the purchaser tax expenses associated with certain exploration, development and project start up activities that it would otherwise be permitted to deduct on its own tax return. The purchaser can deduct these Canadian Exploration Expenses (“CEE”) in an amount up to the purchase price of the flow-through shares in calculating his or her own taxable income.
When the CEE meet additional specified criteria, the Federal government, as well as certain provincial governments, provide purchasers with tax credits in addition to the tax deductions.
Other than with respect to these special tax benefits (which are available only to first purchaser of the shares), flow-through shares are no different from the other common shares issued by the company.
If you have any questions about flow-through shares, please contact us.