In Ontario, Canada, what is the amount of money that a small business corporation can spend on travel/leisure/entertainment expenses?

Imagine a one person software developer running his own corporation.

  • 2
    (1) You cannot deduct personal expenses, only business expenses. (2) Whether you can deduct is not respect to a specific limit, but whether the expense is considered a reasonable business expense. Travel to a software developer conference? Reasonable. Just vacation? Not reasonable. etc. Dec 14 '15 at 21:01
  • Thanks. How about expenses for a Christmas party?
    – Victor123
    Dec 14 '15 at 21:07
  • Who else was invited to the party and what kind of expenses were incurred? Dec 14 '15 at 21:23
  • How will the corporation benefit from a Christmas party? Is the benefit and the tax savings > the cost?
    – Ross
    Dec 14 '15 at 22:14
  • Is the question about the deductibility of such expenses or just spending money in that category? I'd argue that some companies may well spend a lot of money on travel/leisure/entertainment expenses. How much does the Maple Leaf Sports Entertainment company spend on travel and entertainment could be quite different than a one person software development company.
    – JB King
    Dec 14 '15 at 22:23

There is no simple rule like "you can/can't spend more/less than $X per person." Instead there is a reasonableness test. There is such a thing as an audit of just your travel and entertainment expenses - I know because I've had one for my Ontario corporation.

I've deducted company Christmas parties, and going-away dinners for departing employees, without incident. (You know, I presume, about only deducting half of certain expenses?) If the reason for the entertainment is to acquire or keep either employees or clients, there shouldn't be a problem.

Things are slightly trickier with very small companies. Microsoft can send an entire team to Hawaii, with their families, as a reward at the end of a tough project, and deduct it. You probably can't send yourself as a similar reward. If your party is strictly for your neighbours, personal friends, and close family, with no clients, potential clients, employees, potential employees, suppliers, or potential suppliers in attendance, then no, don't deduct it.

If you imagine yourself telling an auditor why you threw the party and why the business funded it, you'll know whether it's ok to do it or not.

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