Ressources Eastmain - Court of Quebec finds that as a junior exploration company’s CEO devoted "substantially all" (75%) of his time to exploration, his salary was not CEDOE
A junior exploration company with two projects in northern Quebec claimed significant portions of the remuneration of its president and CEO as Canadian exploration expense that was eligible for Quebec exploration credits. The correctness of this claim turned principally on whether, under the Quebec equivalent of the “Canadian exploration and development overhead expense” definition, his remuneration was not “in respect of a person employed by the taxpayer whose duties were not all or substantially all related to exploration or development activities.”
Fournier JCQ accepted that the CEO devoted approximately 75% of his time to exploration activities, and only the balance of his time to such matters as investor relations and attending board meetings. He noted in this regard that the federal jurisprudence accorded an “elastic” meaning to the phrase “substantially all.” Accordingly, the claimed salary amounts qualified for the credits.
Fournier JCQ also found that: the costs of constructing dirt berms at the exploration sites to contain the escape of harmful effluent were currently deductible, given that the berms deteriorated and had to be replaced each year; and that the costs for a recent hire to attend a university geology course qualified as CEE.
Neal Armstrong. Summaries of Ressources Eastmain Inc. v. Agence du revenu du Québec, 2021 QCCQ 4379 under Reg. 1206(1) – CEDOE – para. (b), s. 18(1)(b) – capital expenditure v. expense – current expense v. capital acquisition, s. 66.1(6) – CEE – para. (k.1), para. (f).