What is a Flow-through share?
A tax incentive for investors in Canadian resource companies which allows taxpayers to deduct eligible expenses incurred by the company as if they were the investor’s own expenses.
Where have you heard about 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.
Flow-through shares are typically issued by companies in the mining and energy sectors to raise capital to fund exploration and development activities.
Shares are issued to taxpayers as part of an agreement in which the company agrees to incur a certain value of eligible expenses. The company ‘renounces’ these expenses in order that they can be classed as the investor’s expenses for tax purposes. This reduces the investor’s tax bill.
Flow-through shares are often issued by junior exploration companies who aren’t earning enough revenue to pay tax and who would otherwise struggle to finance exploration activities. They have to spend the money gained from flow-through share agreements within 24 months of the shares being bought.
Find out more about Flow-through shares.
Investing in flow-through shares has pros and cons and should be considered as part of a balanced investment strategy.