Business promotion expense is a cost incurred to market your products or services. A number of business owners confuse Business Promotion Expenses with Travel or other expenses. This can lead to complications while filing your tax return to the CRA.
If you are a businessman or businesswoman who is having a hard time differentiating between various types of business expenses, don’t worry. We are here to help! With over 3 decades of experience, our expert accountants have been helping small business owners manage their finances and defend their deductions. Make sure to read the entire article to learn more about business promotion expenses.
Regulations about Business Promotion Expenses
The February 1994 budget changed the regulation to have all business promotion and entertainment only deductible at the rate of 50%. Therefore, it has now become very important to examine any expenditure to ensure that it is to be treated as business promotion instead of Travel or Advertising.
Bulletin IT #518 distinguishes between events and entertainment, indicating that if all employees of the company are invited, the function becomes an event, not entertainment, and should be expensed as Advertising at the rate of 100% rather than as entertainment which is only deductible at the rate of 50%.
As well, amounts for meals incurred while working in remote sites (overnight accommodation required) should be expensed as Travel at the rate of 100% rather than as business promotion, which is only deductible at the rate of 50%. Furthermore, if the cost of meals while attending a conference, convention, seminar, or similar event, is not stipulated in the fee, $51 per day is deemed to be payable for meals or entertainment and should also be expensed as Travel.
Examples of Business Promotion Expenses
Business Promotion or entertainment expenses, which are subject to the 50% limitation, include expenses such as:
- all business meals and entertainment, including the cost of food and drink if entertaining clients (actual or potential) at home;
- tickets to an entertainment or sporting event, including private boxes;
- provincial tax, gratuities and cover charges;
- room rental to provide entertainment.
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