Frequently Asked Questions
Charity Flow-Through Shares (CFTS) are a tax policy instrument used by mining companies, and facilitated by the government, to raise capital for natural resources and critical mineral exploration. Canadians that purchase CFTS receive a tax deduction equal to the amount invested, plus additional provincial and federal credits. Within moments, the client can sell these shares, at a prearranged discount, to a liquidity provider, or institutional buyer of mining shares, to eliminate any stock market risk.
The result? From the sale proceeds and tax deductions, the client can earn an after-tax profit.
Rather than keep the return, clients may donate these shares to charity, unlocking a second 100% tax deduction. The charity then sells the shares to the same liquidity provider, receives the cash proceeds and issues a donation tax receipt to the donor.
Normally, it costs 50 cents to give a dollar, at the highest marginal tax rate. By combining these two tax policies, Canadians can drastically reduce the cost to donate, down to as low as a penny.
Whether it is for-profit, for charities, or a combination of the two, your Charity Flow-Through Provider takes care of this entire process for you, from beginning to end.
A tax loophole implies that someone is skirting the law or bending the rules. Charity flow-through shares are the exact opposite.
The entire structure is based on two long-standing government tax policies. In this case, flow-through shares are intended to raise capital for junior mining companies. To clarify, these are companies with no revenue; they only believe there is a deposit of nickel, copper or cobalt. And the government is more than willing to provide tax breaks to Canadians that help them find out.
Canada is a world leader in mining, generating hundreds of thousands of jobs and more than $100 billion towards our annual GDP. In fact, because most of this mining occurs in the North, it is the number one employer of Indigenous peoples. Meanwhile, mining produces many of the minerals and raw materials we require to create products that we use in our day-to-day lives. In the last federal budget, critical minerals took centre stage for their role in serving as the building blocks of renewable energy technology.
The charitable tax receipt speaks for itself. Since 1918, the government has offered a 100-per-cent tax deduction for Canadians that support charities. And why not? We are doing the government’s work. For every dollar you give to charity, that is one less dollar they need to spend to help society.
On April 7, 2022, the government opened the eyes of many Canadians when it announced the first ever Critical Minerals Strategy, a new set of laws, regulations and tax incentives to help boost the supply of critical minerals, or the building blocks of technology and green energy solutions.
Think titanium for solar panels, copper for circuit boards, and lithium for electric car batteries.
Canada is blessed with many of these natural resources. However, to meet our ambitious net zero targets, exploration for these minerals must increase substantially. Charity Flow-Through Shares is the primary mechanism for how critical mineral exploration in Canada occurs. It is estimated that up to 90% of all exploration occurs due to this financial model.
By purchasing Charity Flow, Canadians can do more than reduce their taxes and help charities. They can also help finance our green energy future.
Using this structure, FTS are immediately sold at a discount to a pre-arranged liquidity provider. Thus, the liquidity provider will take on the stock market risk, which leaves one remote risk – that the junior mining company fails to use the funds raised towards exploration. While extremely unlikely, mining companies offer a 100% indemnification if it were to occur and the client is made whole.
Clients should have a minimum taxable income of $225K, or this could also work for passive income inside corporations. Wealth is not enough. If there is no tax to pay, FTS are not the right fit.