CRA considers that employment severance is not CEE

Canadian exploration expenses are defined to include an “expense incurred…in drilling” etc. CRA considers that a severance payment made to a terminated exploration employee is not CEE (or CDE) as “a severance payment is an expense made by the corporation at the moment of cessation of employment and does not constitute an amount paid for services rendered.” This conclusion is not overwhelmingly correct, as the employee would not be owed any severance if he had not performed any services (see also Lo).

Neal Armstrong. Summary of 8 December 2015 T.I. 2015-0616321E5 F under Reg. 1201(1) - Canadian exploration and development overhead expense.