Schedule 12, Resource-Related Deductions

Schedule 12, Resource-Related Deductions

You have to complete the appropriate parts of Schedule 12 if you are claiming any of the following deductions on Schedule 1:

• Canadian exploration expenses, including Canadian renewable and conservation expense (CRCE)

• Canadian development expenses

• Canadian oil and gas property expenses

• depletion

• foreign exploration and development expenses

• specified foreign exploration and development expenses

• foreign resource expenses

An accelerated investment incentive is available for eligible Canadian development expenses (CDE) and Canadian oil and gas property expenses (COGPE) incurred after November 20, 2018, and before 2028. The accelerated CDE or COGPE does not include expenses incurred by a predecessor corporation that a successor corporation is entitled to claim. It also does not include an expense that is a cost for Canadian resource property you, or a partnership in which you are a member, acquired from a person or partnership with which you do not deal at arm's length.

The incentive will be phased out for expenses made after 2023. For more information, go to canada.ca/taxes-accelerated-investment-income.

Canadian exploration expenses and Canadian development expenses

Canadian renewable and conservation expense

If most of the tangible property in a project is eligible for inclusion in class 43.1 or 43.2, certain intangible project start-up expenses (for example, engineering and design work, and feasibility studies) are treated as Canadian renewable and conservation expenses. You can generally deduct these expenses in full in the year you incurred them, carry them forward indefinitely for use in future years, or transfer them to investors using flow-through shares.

Schedule 12 gives details for the calculations required.

Flow-through shares

The Fall Economic Statement 2018 introduced an accelerated rate for Canadian development expenses (CDE) that a flow-through share (FTS) investor receives from a principal business corporation. This tax measure applies to accelerated CDE renounced under FTS agreements entered into after November 20, 2018, for CDE incurred after the agreement date and before 2028.

A principal business corporation needs to inform the investor that the renounced amount meets the above conditions in order for the investor to benefit from the permissive accelerated rate for these renounced expenses.

If you have invested in an FTS after November 20, 2018, and have received a statement of resource expenses from a principal business corporation, you may generally claim CDE at the rate of 45% in the tax year in which they are renounced to you and, thereafter, at a rate of 30%. To calculate the amount of the CDE deduction you are entitled to claim, see Schedule 12.

References
Part XII of the Regulations
Sections 65 and 66

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