🇨🇦Flow Through Shares🇨🇦17 May 2026 17:02
Why Flow Through Shares can can let investors claim back 80-110% back on their investments - may exolain why they sell at a premium and are so sought after.
Assuming an individual investor is a high-earning resident of Ontario in the highest marginal tax bracket (53.53%) and buys $10,000 worth of critical mineral flow-through shares, the maximum breakdown of tax relief looks like this:
100% Federal & Provincial Income Tax Deduction: The investor deducts the entire $10,000 from their taxable income. At Ontario’s top marginal rate of 53.53%, this reduces their immediate tax bill by $5,353.30%
Federal Critical Mineral Exploration Tax Credit (CMETC): They claim the specific 30% federal credit for the critical minerals targeted at Obonga. This acts as a direct dollar-for-dollar tax reduction worth $3,000.5%
Ontario Focused Flow-Through Share Tax Credit: Because the exploration drilling takes place physically within Ontario, the investor can layer on the provincial 5% tax credit, yielding an additional $500 in tax savings.
Total Tax Savings Claimed Back: $8,853 (or ~88.5% of the $10,000 invested).
But, here is where it gets even better - the Return Can Cross 100% (The True Net Benefit)While the combined tax credits and deductions cut your raw cash risk down to just $1,147 out of pocket, the real "claim back" dynamic relies on limited partnership structures or institutional back-end buyer arrangements: The "Charity Flow-Through" Strategy: Institutional or retail investors frequently execute a structured transaction where they immediately flip the shares to a major institutional buyer (often a liquidity provider or charity program) at a pre-arranged discount (e.g., 60–70% of the initial value).
The Cash Formula: If the investor saves $8,853 on their taxes and simultaneously sells the underlying stock via a structured provider for $6,500 in cash, they walk away with $15,353 in combined value from a $10,000 initial layout.
Not every investor will be able to get the "final kicker" as there are Critical Roadblocks to the Maximum Claim - An investor cannot automatically assume they will capture the maximum percentage due to two highly restrictive tax mechanisms - The Alternative Minimum Tax (AMT): Flow-through share deductions and the 30% CMETC are considered "preferential tax items." High-net-worth individuals claiming heavy FTS allocations risk triggering Canada's AMT, which temporarily caps or recalculates the deductions to ensure a minimum floor of tax is paid.The Cost-Base Adjustment (Capital Gains Risk): The Canada Revenue Agency deems the adjusted cost base (ACB) of a flow-through share to be exactly $0 upon acquisition.
Still writing off 88% isnt a bad start at all.
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