The Canada Revenue Agency (CRA) allows businesses to deduct certain entertainment expenses from their taxable income. However, there are specific rules and limitations on what can be deducted.
Some exceptions and special rules may apply, so for the most accurate and up-to-date information, contact our office for reliable guidance on what you can and cannot write off.
Here is an overview:
Deductible Business Entertainment Expenses
Meals and Beverages:
Generally, you can deduct 50% of the cost of meals and beverages consumed by you and your clients or customers during business discussions.
This includes food, beverages, taxes, and tips.
Tickets and Event Costs:
Expenses related to tickets for entertainment events (such as sports events, theatre shows, or concerts) are also subject to the 50% limit.
If the ticket price includes the cost of a meal or beverages, you need to separate these costs and apply the 50% limit accordingly.
Corporate Boxes, Suites, and Season Tickets:
If you rent a corporate box, executive suite, or similar facility for an entertainment event, you can deduct 50% of the cost.
However, if the cost is not separated from other expenses, the entire amount might be subject to the 50% limit.
Membership Fees:
Membership fees or dues for clubs where the main purpose is dining, recreation, or sporting activities are generally not deductible.
However, fees for professional or business-related clubs may be deductible.
Expenses for Staff Events:
Costs related to staff parties and events are fully deductible, provided that they are available to all employees and occur a maximum of six times a year.
Non-deductible Entertainment Expenses
Certain entertainment expenses are not deductible:
Club Dues and Membership Fees:
Membership fees for golf clubs, yacht clubs, athletic clubs, or similar recreational facilities are not deductible.
Personal Expenses:
Personal entertainment expenses, not related to business, are non-deductible.
Portion of Costs Above Reasonable Amounts:
Any portion of the entertainment expenses that exceed what is considered reasonable under the circumstances may not be deductible.
Important Considerations
Detailed Records:
Keep detailed records of all entertainment expenses, including receipts, the date, the purpose of the expense, and the names and business relationships of the individuals entertained.
Mixed Purpose Events:
If an event or activity has both a personal and business purpose, you can only deduct the portion of the expenses directly related to business activities.
Special Circumstances:
Some exceptions and special rules may apply, so for the most accurate and up-to-date information, contact our office for reliable guidance on what you can and cannot write off.