Attendance at trade shows, conventions and conferences are part of making connections and building your business. Although some business owners receive paid travel to and from these events, many have to pay the expenses from their business. One might think that it is simple and will assume that all these expenses are tax deductible and claim them as such on their tax returns. This is not necessarily the case according to subsection 20(10) of the Income Tax Act.
The Canada Revenue Agency will generally view these expenses as capital in nature as per subsection 18(1)b which means that you have incurred them for the purpose of developing long term assets i.e. new customers. Capital expenses cannot be deducted in one year rather they must be depreciated over a number of years. In this way, you still get a benefit from these expenses however you have to spread it over time. This applies to all businesses regardless if structured as a sole proprietor, partnership or a corporation.
Subsection 20(10) comes to the rescue somewhat and allows these expenses to be fully deductible in a single year under the following conditions:
- these expenses were incurred “in connection with the business”
- the convention was held by “a business or professional organization at a location that may reasonably be regarded as consistent with the territorial scope of that organization”
- you are only allowed to claim these expenses for two conventions per year
If you travel to more than two conventions per year, you will need to ensure that all the expenses are recorded accurately because your travel expense category will be a point of interest for CRA.
Arrange a free consultation with me, Carmela CPA
Please email me at firstname.lastname@example.org or call me (647) 828-5531 to make an appointment.