One structure. Less tax for high earners, corporations and donors.
A structured flow-through transaction gives you a full deduction against income already earned, plus a tax credit. It works personally, through a corporation, or on what you give. The buy and the sell are arranged in advance and close together, so the price and liquidity risk are carried by the structure, not by you.
Three ways to buy flow-through shares. Only one of them takes out the market risk.
The tax treatment is the same in all three. The difference is how long you wait to sell, and what the share price does while you wait.
Individuals
You’re a high earner and pay tax at the top marginal rate on employment, investment and/or business income.
The structure reduces the tax you pay this year, against income you’ve already earned.
Over and above the deductions, there's always an additional tax credit (that's a tax REDUCTION, not a tax DEDUCTION) of 15%, and in the past few years the government introduced a 30% tax credit if they are exploring for what have come to be known as critical minerals which are fundamental to modern life- including but not limited to potash, lithium, graphite, nickel, cobalt, copper, cesium, and rare earth elements. Canada updated its official strategy in 2024 to focus on 34 specific metals and minerals.
Corporations
You own a Canadian-controlled private corporation, and getting money out of it is expensive. CCPC Shareholders face high combined corporate and personal rates on distributed profits. The structure gives shareholders a way to access corporate funds at an extremely low cost.
IDEAL FOR
- Holdcos where passive investment income is generally taxed at the highest corporate rates
- Opcos with income above the small business deduction limit, taxed at the general corporate rate
- Corporations sitting on significant passive income, investment portfolios or surplus cash
- Owners looking for a more tax-efficient way to move corporate capital into their own hands
Philanthropy
You already give. For most people the only thing limiting how much is what it costs.
The standard charitable tax credit has most donors out of pocket roughly 50 cents per dollar donated. A properly structured charity flow-through transaction cuts that down, usually to somewhere around 25 cents - and potentially much lower.
The charity receives the same gift either way. What changes is what it costs you.
Or, turn it around and the same out of pocket money can fund a much larger gift.
The surprise tax bill your RRSP or RRIF will trigger.
When you die, your RRSP or RRIF is taxed as if you cashed it in on your last day. This alone will typically leave one subject to the top tax rate. For most Canadians that means roughly half goes to the government.
That’s not a risk. It will happen. and you can plan for it.
The Estate Tax Shield (sometimes referred to as a RRIF meltdown) uses a structured flow-through transaction to move that future tax bill forward into a planned, tax-efficient withdrawal today. Same registered money. Meaningfully less tax paid.
If you’re an older individual with a substantial RRSP or RRIF balance you don’t need to fund your lifestyle, this is worth a conversation.
Structured flow-through transactions, in use in Canada since 2006
The risk that doesn’t go away.
The structure passes the market price and illiquidity risk to the buyer. The issuer risk stays.
The mining company raising the money has to spend it on eligible exploration expenses, generally by December 31 of the year after the shares are issued. If it doesn’t, the tax benefits can be reduced or denied, in part or in whole.
That’s the real risk. It’s also why WCPD, the registered dealer I work with, does serious due diligence up front, and confirm the issuer has the resources to follow through before anyone agrees to a transaction. There’s a second safeguard in the paperwork. The subscription documents include an indemnity agreement in which the issuer indemnifies subscribers if it runs afoul of the spending rules.
I found this because I needed it for myself.
I spent thirty years as an investment and insurance advisor. Sold the business in 2017 and the sale left me with a substantial tax bill.
That’s how I found this. A structured transaction (sometimes referred to as a bought deal) using flow-through shares. It solved my own problem first, before I ever thought about helping anyone else with theirs.
Now I do it for other people. Accredited investors paying too much tax, business owners with money trapped inside a corporation, philanthropically generous individuals and registered charities whose donors would give more if giving cost less.
What colleagues say about Ken
"It has been my pleasure to know Ken Stern and to call him friend for over 20 years. I met Ken during my years working with a highly respected actuarial consulting firm. Ken has always enjoyed analyzing what some would consider to be complicated or complex financial structures and then making them understandable to his clients. His intelligence and caring is on display when it comes to the area of Flow Through Shares. That structure has changed dramatically since my time as a Financial Advisor, and in the right circumstances and for the right clients they really make sense. They provide the tax relief to entrepreneurs, professionals and affluent individuals who are challenged daily by our unfortunate tax system.
Ken is a man of true gravitas. A dedicated father, grandfather and husband who has travelled extensively and has a life experience that shows every day in his work. Ken understands that his work helps better the economic circumstances of individuals, families, communities and businesses alike. He is on the forefront of new intelligent and timely financial products showing his dedication to hard work and an unwavering ethical code."
"Ken has a rare ability to take a complex tax strategy and Fisher-Price it — plain language, clear steps, easy to execute. That's why I never hesitate sending people his way."
"Ken and I have known and worked together for more than 30 years. He has a rare ability to explain complex tax and charitable-planning ideas in a clear, practical way. Just as importantly, Ken never loses sight of the people and charitable goals behind the planning. He genuinely cares about helping clients make informed decisions and create a greater impact with their giving."
"When Ken first contacted me, I was skeptical because my past experience with flow-throughs involved the limited partnership structure. As soon as I had a chance to see how things could be arranged using bought deals, I was hooked. Way simpler and way more certainty."
Testimonials reflect the personal views of the individuals quoted. They are not investment advice, and they do not indicate or guarantee any tax outcome or investment result.
Recent conversations
All videos →Estate Tax Shield - Don't let the CRA take more than necessary!
The magnifying power of Flow through shares
Philanthropy Friday - How Flow-through shares enhance donations; Ken Stern & Peter Nicholson
Start with the Primer.
A guide to the tax benefits and mechanics of flow-through shares. One transaction, completely outlined, start to finish. It answers much of what people ask me at the start of their investigation.
No call required. I may send occasional writing on the same topic. Unsubscribe any time.
Ask a question, or book a meeting.
If you’d rather I speak with your accountant first, send them the For Accountants page. I’m happy to take it from there.
