Non-RRSP Investment Opportunities
by Brahma S. Varma
(Surrey, BC, Canada)
Investment Planner RRSP Specialist
RRSP has gained upper hand in financial planning because the contribution is tax-deductible. But few people know that the federal and provincial governments in Canada have wonderful tax-incentive programs which allow people to claim more than 100% tax-deductions.
Generally, the government offers tax-incentives to support industries or sectors offering greater employment opportunities. The income-tax coming from new jobs more than compensates that amount it forgoes to the investors. Today, only Mining and Energy Exploration sectors are eligible for tax-incentives. Canadian can deduct their investment in Flow-Through Shares (FTSs) of these sectors as 100% tax-deductible. The investment may or may not be via RRSP.
Information about tax advantages of Flow-Through Shares is available on the Canada Revenue Agency website: http://www.cra-arc.gc.ca/
Here are some main points:
1. Amount invested in FTSs is 100% tax-deductible.
2. Mining Sector TFSs are also eligible for 15% federal tax-credit.
3. Depending on where mining explorations are being carried out, an FTS would also qualify for a provincial Tax-credit. The BC offers 20% tax-credit while Ontario rate is 5%.
Total tax deduction in mining FTSs can go as high as 158%. For example tax-savings to a mining FTS investor in British Columbia would be 69%.
Energy Sector FTSs can be transferred to the investor's self-managed RRSP as in-kind transfer. In other words, FTS contribution provides Double Tax- Deduction. In BC, for someone in the top tax-bracket, FTS + RRSP will provide 87.4% in tax-savings.
The beauty of these tax-incentives is that it is universal. It is not the monopoly of the rich. It is available to all Canadians.
Readers are advised not to depend exclusively upon the information given here. They should discuss the subject with their accountant.
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