Representation expenses, convention, advertising, …

FOOD, BEVERAGES AND ENTERTAINMENT EXPENSES, CONVENTION EXPENSES AND ADVERTISING EXPENSES

FOOD, BEVERAGES AND ENTERTAINEMENT EXPENSES

In computing your business income, you are allowed to deduct a reasonable amount for your food, beverages and entertainment expenses attended in connection with a business or property taxable income.

These expenses are deemed to be 50% of the lesser actual amount paid or payable or the reasonable amount in the circumstances. The 50% limitation applies for all purposes. Unless that you are in business of providing the food, beverages or entertainment, for example, restaurants, hotels, and airlines.

The 50% limitation does not apply to the Christmas party or similar event to which all employees at a particular place of business have access.

The entertainment expenses are also subjected to the 50% limitation: tickets cost for a theatre, concert tickets, athletic event or other performance, admission to a fashion show, except, membership or dues in golf club and gym.

You also must keep registration of the names and business addresses of the clients or any other person who had been part of the meal and or entertainment.

(References: IT-518R, IT-148R3, TN12)

Quebec maximum eligible representation expenses

On top of the rule of the 50 %, Quebec tax department made a limit to eligible deductible representation expenses according to your sales. Here are the maximum amounts according to your sales:

Sales Maximum eligible
32 500 $ and less 2.00 %
Between 32 5000$ and 52 000 $ $650 .00
52 000 $ and more 1.25 %

The maximum amount of 1.25 % does not apply to meals and drink expenses made under normal and usual business at 40 kilometers and more from your business place as soon as they are made for enterprise purposes.

Please take note that this 1.25 % rule also apply to the Quebec sales tax refunds on business expenses.

This 1.25 % rule does not apply to big business ( which are making 10 millions and more of sales) because they are already submit to more severe limitations.

CONVENTION EXPENSES

A self-employed taxpayer who is carrying on a business or practicing a profession is allowed to deduct, in computing income for a taxation year from a business, expenses incurred in attending not more than two conventions a year provided that the conventions were

a) held by a business or professional organization
b) attended in connection with the taxpayer’s business or professional practice
c) held at a location that may reasonably be regarded as consistent with the territory scope if the organization sponsoring the convention but attendance at the convention must be related to the business or professional practice on by the taxpayer

The meals at the convention must be reasonable portion of the fee as pertaining to these benefits. The amount of this portion of the fee must be specified and is deductible at the limitation of 50%. For each day of the vent which entitles the participant to such benefits, CCRA consider that 50$ is deemed to be paid or payable in respect of food, beverages and entertainment. This provision does not apply to incidental beverages and refreshments made available during the course of meeting or receptions, such as juice, coffee, doughnuts and muffins.
(Reference: IT-131R2)

ADVERTISING

In general, the advertising expenses are totally deductible, except if it is made of pamphlets or any countable items which can be used in the future and it is part of an inventory. The golf tournament sponsors advertising expenses are generally deductible if you are able to prove that it will bring you any new clientele, else wise, these sponsors expenses will be accounted for advertising expenses.