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Legislative Change over Canadian Exploration Expense (“CEE”)

Legislative Change over Canadian Exploration Expense (“CEE”)



Legislative Change over Canadian Exploration Expense (“CEE”)
23 Sep 2016
Written by: Joseph Bonvillain

Certain costs associated with community consultation and environmental studies are now part of the CEE for income tax purposes

Prior to a legislation change, there was a lack of consistencies amongst the provinces and territories within Canada relating to claiming environmental studies and community consultations costs as CEE. In most cases, costs associated with community consultations and environmental studies were classified as either a period cost or Canadian Development Expenses (CDE) instead of CEE, which means that companies were not able to finance those costs using funds raised from flow-through shares, which could be renounced as CEE.

Junior resource mining companies in Canada face challenges when raising financing in the current market. The new legislative change now allows companies to use flow-through financing for environmental costs and community consultations, which are crucial to achieving both legal and social objectives.

In connection with the issues noted above, the Federal government budget (announced on March 1, 2015) proposed to “modify the income tax rules to provide that CEE treatment is not denied for the cost of otherwise eligible environmental studies and community consultations solely because they are a pre-condition to obtaining an exploration permit or license.”

In the 2016 Federal budget tabled on March 22, 2016, the Federal Government indicated that it intends to proceed with the tax measures announced on March 1, 2015 relating to the qualification as CEE of certain costs associated with undertaking environmental studies and community consultations. 

Impact to Canadian Mining Companies  

The new tax measure will facilitate resource exploration in Canada.  According to the 2016 Federal budget, it will ensure that “the costs of environmental studies and community consultations that are required in order to obtain an exploration permit or licence are eligible for CEE tax treatment.  CEE might be immediately deducted in the year incurred or renounced to investors using flow-through shares.  This new measure applies to expenses incurred after February 2015.”

As this is a new legislative change and the CRA has not yet updated their guides, additional information can be found in the bill approved by the parliament by clicking here.


If you require additional information on new filing requirements for Canadian exploration expenses or wish to discuss how to apply them for your company, please contact Manning Elliott partner, Joseph Bonvillain, at (604) 714-3643 or via email at joseph@manningelliott.com for assistance.

The above content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.

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