For Ontario’s highest earners, Flow-Through Shares offer a rare way to keep more of what you earn and invest in Canada’s future.
Cut Your Taxes. Fuel Canada’s Future.
If you’re in Ontario’s top tax bracket (~53.53%), you know how much of your hard-earned income gets eaten up by the CRA. What most people don’t know is that Canada actually has a program that rewards you for helping develop the country’s critical minerals.
Flow-Through Shares (FTS) let you turn tax dollars into investment dollars—immediately reducing your tax bill while directly funding resource exploration. For high-income earners, it’s one of the most powerful ways to keep more of what you earn and support a sector vital to Canada’s future.
What Are Flow-Through Shares?
Flow-Through Shares allow resource companies to “flow through” exploration expenses to investors. That means you, the investor, can deduct these expenses from your own taxable income and also claim valuable federal and provincial tax credits.
For critical minerals (lithium, nickel, cobalt, rare earths):
- 100% deduction of your investment against taxable income
- 30% federal Critical Mineral Exploration Tax Credit (CMETC)
- ~5% Ontario provincial credit
Why They Work Best for Top-Bracket Investors
At the highest Ontario tax rate, every $100,000 invested generates:
- $53,530 in tax savings from the deduction alone
- $35,000 in credits (federal + Ontario)
That’s ~$88,530 in tax relief in Year 1.
The Buy–Sell (Also Known as Structured) Strategy
More sophisticated investors use a buy–sell structure:
- You subscribe for Flow-Through Shares
- A liquidity provider purchases them from you immediately at a discount (often 25–35%)
- You get most of your cash back, lock in your result, and avoid exploration risk
Example: $100,000 Investment (Ontario, Top Bracket, 30% Discount Buy–Sell)
Year 1
- Contribute $100,000
- Sell immediately → Receive $70,000 back
- Deduction + Credits = ~$88,530 tax savings
- Capital gain of $70,000 realized (ACB $0) → Tax ≈ $25,000
Net Result
- Net After-Tax Gain ≈ $33,500
All realized in Year 1 if the buy–sell happens in the same calendar year.
Key Benefits for High-Income Ontario Residents
- Massive upfront tax savings (deduction + credits)
- All effects in one year with immediate buy–sell
- Support for Canada’s critical-minerals sector
- Attractive effective return even after accounting for capital-gain tax
Points to Keep in Mind
- The sale proceeds are fully taxable as a capital gain (since ACB is $0)
- Alternative Minimum Tax (AMT) may apply, but credits can usually be carried forward
- Proper structuring and paperwork are essential to secure deductions and credits.
Final Word
For Ontario residents in the highest tax bracket, Flow-Through Shares offer one of the few ways to dramatically cut your tax bill while supporting a sector critical to Canada’s future.
Contact your adviser if you think this might work for you. We’ll run your personalized numbers and coordinate with your tax advisor.
Disclaimer: This article is for general information purposes only, and is not legal, financial, or tax planning advice. Everyone’s situation is unique, and this article cannot apply to every person. The reader should not take any action, or refrain from taking any action, as a result of this article without first obtaining legal or professional advice.
