Federal budget news flash: exploration tax credit extended

The federal budget tabled on Tuesday extends the temporary 15% mineral exploration tax credit on flow-through shares by one year, according to tax specialists at accountants PriceWaterhouseCoopers Canada (PWC).

The extension, which means that the federal tax credit is now in force through March 2010, is intended to help the mining sector manage through the downturn, by retaining the tax benefits that investors in flow-through shares receive.

In a release, PWC said that the tax credit extends even further. “Through the one-year ‘look-back’ rule, funds raised with the benefit of the credit in 2010, for example, can be spent on eligible exploration activity until the end of 2011.”

“The temporary credit can help companies raise capital for mining exploration by providing an incentive to individuals who invest in flow-through shares issued to finance exploration,” PWC said.

According to John Gravelle, a partner at PWC’s Toronto office and Canadian tax leader for the firm’s mining industry practice, flow-through shares also provide investors with provincial tax credits, which vary by province, as well as a tax deduction.