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Budget 2014-2015 : The Quebec Government reduces the mining exploration tax incentives 

June, 2014 - Emmanuel Sala and Jean-Philippe Latreille

As part of the June 4, 2014 Budget Speech, the Quebec Government announced an immediate 20% reduction in the rates of some business tax credits. The mining exploration tax incentives in Quebec did not escape this reduction.


Flow-through share regime

The flow-through share regime currently allows investors to deduct in the calculation of their income an amount equal to 100% of the subscription price. In addition, the Quebec legislation provides for two additional deductions of 25% each where certain conditions are met. The first deduction targets the exploration expenses incurred in Quebec (both surface and underground exploration), while the second deduction targets surface exploration expenses only that are incurred in Quebec. In certain circumstances, 150% of the cost of an investment in a junior mining exploration corporation may be claimed as a deduction in the calculation of the income of an investor.


Lastly, it is generally possible for a corporation proceeding with a public offering of flow-through shares to renounce the issue expenses to the benefit of the subscribers. However, this renunciation is limited to 15% of the proceeds of the issue.


In the context of the 20% reduction of some tax incentives, the 25% rate of the two additional deductions is reduced to 10% for each of them. Therefore, the maximum deduction investors may benefit from is henceforth 120% of the subscription price of flow-through shares.




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