Prospectors and Developers Association of Canada (PDAC) – September, 2007
Note: This table has been prepared to provide the guidelines that the Canada Revenue Agency (CRA) will follow in determining whether environmental study expenses, community consultation expenses and feasibility study expenses that are incurred by mining companies at the exploration stage (i.e. for the purpose of determining the existence, location, extent or quality of a mineral resource in Canada, hereinafter referred to as the “purpose test”) will qualify as Canadian exploration expenses (“CEE”). The table is intended as a guide only. The actual treatment of a particular expense incurred by a taxpayer will depend on the facts relevant to the particular situation and, therefore, may differ from that outlined in this table.
|
Issue |
Description of Expense | Guideline |
| Environmental studies | Environmental assessments undertaken to meet a legal or informal requirement to obtain a permit. |
Not CEE as it is part of the cost of a Canadian Resource Property (CRP) which is Canadian Development Expense (CDE) |
| Environmental assessments undertaken to meet a legal or informal obligation under the terms of the permit. |
CEE where related to the permit providing for the exploration process (not part of the cost of a CRP) |
|
| Other environmental assessments conducted at the discretion of the taxpayer: |
||
| – environmental sampling/monitoring in relation to an exploration activity; | CEE | |
| – targeted environmental assessments (e.g., vegetation, fisheries and water assessments) conducted in conjunction with a specific exploration activity; |
CEE | |
| – general baseline environmental assessments undertaken prior to carrying out a specific exploration activity. |
Not CEE (does not meet purpose test) | |
| Community consultation | Consultation to assess community attitudes/community information program, undertaken prior to a decision to explore. |
Not CEE (does not meet purpose test) |
| Consultation undertaken to meet a legal or informal requirement to obtain a permit. |
CDE (part of the cost of a CRP) | |
| Consultation undertaken to meet a legal or informal obligation under the terms of the permit. |
CEE where related to the permit providing for the exploration process (not part of the cost of a CRP) |
|
| Negotiation to secure surface access for exploration purposes (beyond the requirements for/of the permit). |
CEE (where incurred in relation to the exploration process and not a broader purpose). |
|
| Negotiation with local community to secure certainty with respect to exploration operations (additional to requirement for/of a permit and where other party does not hold surface rights). |
CEE (not part of the cost of a CRP) | |
| Other consultation undertaken at the taxpayer’s discretion in respect of the: |
||
| – exploration process only; | CEE | |
| – exploration and mining process. | CEE to the extent the expense meets purpose test | |
| Feasibility studies | Preliminary planning for a potential exploration activity undertaken prior to a decision to explore. |
Not CEE (does not meet purpose test) |
| Planning for, and studies relating to, the conduct of an exploration activity or some part thereof. |
CEE | |
| Physical and chemical assessments related to a deposit, with the objective of informing a decision whether to undertake more advanced exploration at the site. |
CEE | |
| Assessments of the physical and chemical characteristics of the deposit to assess its potential as a commercial deposit. |
CEE | |
| Assessments of mine development options and/or profitability of developing the deposit into a mine. |
Not CEE (does not meet purpose test). |
Note: In this report I have integrated the exact content of the original source, to be certain that this information is retained. If you would like to read this report on the website of the original publisher I recommend you to click the source link below.
Source: http://www.pdac.ca/pdac/advocacy/financial/pdac-cee-guidelines.pdf
