Fiscal Incentives: Updating Canadian Exploration Expenses

The basis of the flow-through share regime is transfer (renunciation) of Canadian Exploration and Development Expenses (known as CEE and CDE) to investors, who can then claim tax deductions and credits based on these expenses. The Income Tax Act defines CEE as ‘any expense incurred by the taxpayer for the purpose of determining the existence, location, extent or quality of a mineral resource in Canada’

How the Canadian Revenue Agency (CRA) administers the purpose test with respect to what is eligible as CEE can often cause uncertainty. Therefore, PDAC has worked extensively with government stakeholders to improve the clarity of CEE rules. This work has yielded several important public documents published by CRA in recent years, which further clarify the nuances of CEE eligibility for mineral explorers. See a detailed mineral exploration expenditure review table and two technical interpretations based on industry scenarios below. 



Technical Interpretation - environmental studies & community consultation costs (2018)

In response to PDAC’s request, In November 2018 CRA published technical interpretation regarding CEE, providing greater clarity regarding certain costs aimed at obtaining support from an indigenous community to undertake the exploration program.

The document addresses the following: capacity payments; ongoing consultation; environmental assessments; and, legal documentation.

Learn more

CEE Expenditure Review Table (2022)

Following extensive advocacy by PDAC with support of other industry’s stakeholders, CRA published a document in 2019 to provide further guidance regarding what expenses are eligible as CEE along the mineral development sequence.

CRA has published an updated table in 2022 to address concern raised by PDAC based on the 2019 table and this update gives greater clarity around a number of activities related to mineral exploration and their eligibility as CEE.

Learn more

Technical Interpretation - "Quality and the CEE Purpose Test (2022)

CEE eligibility is determined by the purpose test, which requires expenses be incurred by a taxpayer “for the purpose of determining the existence, location, extent or quality of a mineral resource.”

This technical interpretation focuses on “quality”, explains what is included in this definition and provides a rationale for exclusion of expenses that go beyond the investigation of quality (e.g. determining the economic feasibility of a deposit or conducting market studies)

Learn more