Promoting your business is essential if you want to reach new clients and grow your business. While marketing can be expensive, the Canada Revenue Agency (CRA) offers business owners tax deductions for promotion costs. Some expenses fall squarely under the umbrella of advertising, but you may incur some promotion costs that are classified differently. To optimize your write-offs, it’s important to understand the CRA’s rules and expectations.
TV and Radio Advertising
If you purchase air time on the TV or radio, you may write off those costs as advertising expenses on your tax return. However, the ads must be on Canadian TV or radio stations. If you advertise with a foreign broadcaster, you may not write off the expenses even if the ads are directed toward the Canadian market. You can claim these expenses on line 8521 of Form T2125, Statement of Business and Professional Activities.
You may also claim expenses related to print advertising on line 8521, but the CRA has special rules on this type of advertising. Namely, at least 80% of the periodical’s non-advertising content must be original editorial content. This means the content must be news, stories, or similar types of content. If the content is branded — meaning it is framed like an article but is written to promote a product — it does not count toward the 80% threshold.
If the publication features 80% or more editorial content, you may write off the entire cost of ads you purchase. However, if less than 80% of the publication’s non-advertising content is editorial content, you may only write off 50% of the expenses.
You may deduct the full cost of online advertising with the rest of your business’s advertising expenses. Additionally, if you hire a social media manager or any other professional to help with online advertising, you can deduct the cost of wages or consultancy fees on line 9060 of Form 2125. Similarly, if you pay costs to maintain a website, you can also write off those expenses as business costs.
Entertainment and Meals
In some cases, promoting your company means buying advertising that thousands of people can see. In other cases, it means sitting down and having a one-on-one chat with a prospective new client, partner, or investor. If you incur entertainment or meals expenses related to promoting your business, you may write off half of those expenses. You may want to consult with an accountant at tax time or use quality tax preparation software to ensure your expenses are deductible. In some cases, the laws can be confusing. For example, while you can deduct the cost of a meal at a country club, you cannot deduct green fees for a game of golf.
Attending conventions allows you to learn more about your industry and network with like-minded entrepreneurs. In this way, conventions can be part of promoting your company. The CRA allows you to write off the cost of two conventions per year, but you may only write off the cost of half the food you buy at the convention.