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A Powerful Tool to Reduce Your Taxes

2024-02-09

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In the field of financial planning*, it is essential to find effective strategies to reduce taxes while maximizing returns. Structured flow-through shares stand out as one of the most advantageous solutions for high-income individuals in Quebec and Canada. Let’s explore the benefits, target audience, and promising results of this tax strategy.

The Advantages of Structured Flow-Through Shares

Structured flow-through shares are designed to offer a risk-free investment opportunity with potentially high returns, which can reach up to 30%. This tax instrument was developed to encourage the exploration and development of natural resources, thus offering investors a unique way to reduce their tax burden while supporting a sector of activity crucial to the Canadian economy.

One of the main attractions of structured flow-through shares lies in their ability to provide significant tax deductions and tax credits for investors. Unlike other forms of investment, flow-through shares allow mineral exploration companies to waive their Canadian exploration expenses (CIEs) and transfer them to investors. This results in a substantial income tax reduction for investors, as these costs become fully deductible.

Furthermore, thanks to an optimized structure where the initial buyer sells the shares at a discount to an end investor on the same day, market risk is significantly mitigated or even eliminated. The return on investment is therefore more predictable, making this option particularly attractive for those seeking to secure their capital while benefiting from tax advantages.

Target Clientele for Structured Flow-Through Shares

Structured flow-through shares are specifically designed for high-income individuals, particularly those in the highest marginal tax brackets. They are especially suited to business owners, high-net-worth professionals, and investors looking to reduce their tax burden. Indeed, these shares are ideal for clients planning significant withdrawals from their RRSPs or RRIFs, or for those with high taxable income who have recently realized a substantial capital gain and wish to maximize their tax savings.

To be eligible to invest in structured flow-through shares, investors must be accredited, meaning they must have a personal income of $200,000 (or $300,000 with their spouse) over the past two years, or possess more than $1,000,000 in net financial assets. These eligibility criteria are designed to ensure that only well-informed individuals capable of withstanding the risks associated with this type of investment can benefit.

Attractive results for sophisticated investors

The potential returns of structured flow-through shares can be impressive, with after-tax returns that can exceed 30%. These results are largely attributable to the tax credits and deductions available to investors, which significantly reduce their net investment cost. For example, for an initial investment of $100,000, cash flow analysis shows a net after-tax return of approximately 31.32%, which is extremely competitive compared to other forms of investment with similar risk.

Furthermore, provincial and federal tax credits, such as the Investment Tax Credit (ITC) for exploration, further enhance the financial advantages for investors in Quebec. This additional tax support helps maximize returns and reduce the overall tax burden, making structured flow-through shares a preferred solution for investors seeking effective portfolio optimization strategies.

Contact us if you would like to know more about structured letters of credit

Structured flow-through shares offer a rare combination of risk reduction and high returns, while also providing significant tax benefits. They are particularly well-suited to high-net-worth investors looking to reduce their tax burden while supporting the Canadian mining sector. For financial advisors, they represent a strategic tool for attracting and retaining affluent clients by offering innovative and tax-efficient wealth management solutions. If you are in a high-income situation and wish to reduce your taxes while maximizing your returns, structured flow-through shares

*Before considering this investment for tax purposes, please consult your accountant or tax advisor to assess its impact on your personal tax situation.

*Financial planning services are offered through Jonathan B. Therrien and Isabelle Bérard, Independent Financial Planners. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investor Protection Fund.

This information was prepared by Fabien Major, who is an investment advisor for iA Private Wealth Inc., and does not necessarily reflect the opinion of iA Private Wealth Inc. The information in this text comes from sources believed to be reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on analysis and interpretation as of the date of publication and may change without notice. Furthermore, they do not constitute an offer or a solicitation to buy or sell the securities mentioned. The information contained in this document may not apply to all types of investors. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and a trade name under which iA Private Wealth Inc. carries on business.

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*Financial planning services are offered through Isabelle Bérard, Yves Razafindrazaka, Fabien Major - independent representatives, and Jonathan B. Therrien - Majoré Gestion privée inc. Only the products and services offered through iA Private Wealth Inc. are covered by the Canadian Investor Protection Fund.
**Insurance products are offered through Fabien Major, Isabelle Bérard, Yacob Nour, Yves Razafindrazaka, Simon-Pierre Côté, Senthuran Selvarasa – Independent Representatives, Frédérique Poirier, Jonathan B. Therrien - Majoré Gestion privée inc., and Jean-François Gosselin – Services financiers Gosselin Inc. Only the products and services offered through iA Private Wealth Inc. are covered by the Canadian Investor Protection Fund.