Every province and territory in Canada has released their 2023 budget, and none comes with a bigger change to their Flow-Through regime than Saskatchewan. Recognizing that tax incentives are effective, fair, and unlike direct government investment, requires much of the economic risk to be borne by the investor, the government of Saskatchewan has moved to triple the existing Saskatchewan Mineral Exploration Tax Credit (SMETC) from 10% to 30%. This change is coupled with additional investments in the exploration sector, and is a strong signal that Saskatchewan is prioritizing resource sector economic growth. Saskatchewan is home to 23 of the 31 critical minerals on Natural Resources Canada’s Canadian Critical Minerals list, including world class deposits of potash and uranium. However, unlike the federal credit, the 30% Saskatchewan credit is available for all exploration funded under the Flow-Through regime in the province and not limited to just critical minerals.
Inter-provincial competitiveness is often top of mind as provinces write their annual budgets, aiming to attract investment and create jobs within their jurisdiction, more recently complicated by a $1.2 trillion spending package passed in Washington. Over the last year governments across Canada have worked to attract electric vehicle manufacturing with large direct subsidies. Of course, the entire electric vehicle supply chain starts with exploring for critical mineral deposits. Canada is the only country in the Western Hemisphere with every critical mineral required to manufacture an electric vehicle battery. With an eye to competitiveness, in the case of flow-through, a higher provincial mineral exploration tax credit results in a lower cost of capital for issuers. When provinces compete for exploration capital, a more generous mineral exploration tax credit can make the difference between an exploration claim that remains relatively untouched, and a claim that is actively explored. Exploration funded under the Flow-Through tax regime results in immediate job creation in remote and largely indigenous communities. « Exploration investment provides an exponential return that is key to the financial health of the province, » noted Minister Jim Reiter, « Saskatchewan’s success in potash and uranium production already accounts for 12 per cent of provincial gross domestic product. »
Fine Print
Directly from the Saskatchewan Budget:
- The SMETC is a non-refundable Personal Income Tax (PIT) credit on those eligible exploration expenses. Investors can apply the credit against Saskatchewan PIT that would otherwise be payable for the taxation year in which the investment was made. The credit can be carried back three years and carried forward 10 years.
- The SMETC is harmonized with the Government of Canada’s 15.0 per cent Mineral Exploration Tax Credit, as well as its 30.0 per cent Critical Minerals Exploration Tax Credit, which further increases the attractiveness for Saskatchewan residents investing in the mineral exploration sector
Learn more about the Saskatchewan 2023 Budget:
https://www.saskatchewan.ca/government/budget-planning-and-reporting/budget-2023-24/budget-documents
Alanna can be contacted at alanna.clark@peartreecanada.com, and welcomes your comments on this piece.
