Corporate Tax Planning: Choosing a Vehicle for Resource Business Ventures

Abstract

In the Canadian mining industry, it may be commercially beneficial for two or more corporations to undertake a business venture together to explore a resource property and subsequently develop and operate a mine. Four vehicles are commonly used to carry on such ventures: incorporated joint ventures, unincorporated joint ventures, general partnerships, and limited partnerships. This article highlights some of the income tax issues that must be considered when negotiating a choice of vehicle with an arm's-length party. The article focuses on key provisions of the Income Tax Act (Canada) that apply in the context of resource business ventures including, in particular, the flowthrough share, successor, at-risk, and tax shelter investment rules. The relevance and tax implications of these provisions are discussed, in turn, for each of the four vehicles, with a view to assisting the parties to the venture in making an informed decision.