Francesca Giroux, CPA
For the Lakeside Leader
Now that summer is around the corner many individuals will be considering taking advantage of the warm weather and hitting the greens. Before you take out your business debit card to pay for that round of golf be sure to consider that the Canada Revenue Agency clearly states that green fees at a golf club are not a deductible business expense. Club dues for a golf club whose primary purpose is to provide dining, recreational, or sporting facilities to its members are also not deductible. As such any payment for these dues out of your business account would be allocated against your shareholders loan.
There are also additional restrictions placed on recreational property and facilities, for example camps, lodges and yachts (read boat). A tax payer is not allowed to deduct the expenses related to the use or maintenance of a yacht, camp, or lodge unless these expenses are part of the ordinary course of business. The ordinary course of business does not include the entertainment of clients, suppliers, shareholder or employees.
Some examples of items that are considered to be entertainment expenses (and thus are subject to the 50 per cent limitation) include tickets for athletic events, theatres or concerts. As well, the cost of hospitality suites, cruises, and the expenses incurred while entertaining guests on vacation are also subject to the 50 per cent rule. Deductible meals and entertainment expenses are amounts incurred to wine and dine current or potential clients, customers or suppliers. The tax treatment of such expenditures is not the same as it is for the preparation of financial statements. Current tax rules only allow 50 per cent of the cost of meals and entertainment to be deducted as well as 50 per cent of the GST to be eligible for rebate. The 50 per cent limitation is to reflect your share of the meal or entertainment expense. Therefore, for tax purposes you are better off entertaining only one person at a time, as you will be able to expense the amount that is attributable to the client.
So be sure to consider the tax treatment of your entertainment choices prior to engaging in a round of golf or sporting event!
Please write in with your questions to firstname.lastname@example.org.
Information provided is of a general nature. As each individual or company’s situation is unique, you may wish to consult with your CPA for information specific to your own needs.