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.