With the COVID-19 pandemic easing up, an increasing number of organizations are moving away from online events and reintroducing in-person conventions.
This is good news if you are self-employed. That’s because the self-employed can deduct expenses for attending up to two conventions per year from their business income when it comes to filing their taxes.
But there are a few rules …
For expenses to be deductible, the convention must be held by a business or a professional organization. This does not, however, mean that you can host a convention so that you can deduct travel and vacation expenses.
The convention must be at a location that is “reasonably consistent with the territorial scope of that organization” (Income Tax Act). For example, if a convention for the Ontario Manufacturers Association is held in Jamaica, it won’t qualify.
There is one exception. If the convention, which would have qualified in Canada, is held in the United States it will still qualify. This is because of the Canada/US Tax Treaty.
For expenses to be claimed, the convention must be held in the same year that you’re claiming the expenses.
To claim convention expenses, they must have been paid in the year you are claiming. Expenses that are incurred or payable do not qualify.
You are not required to be a member of the organization hosting the event. You must, however, be attending the convention in connection with your business/professional practice.
When these rules don’t apply
If you can justify your attendance at a convention as an expense for the purpose of earning current business income, and not capital, it can be deducted regardless. It doesn’t have to follow the above five rules and can exceed the two events per year restriction.
Other considerations
There are a few more factors to consider when claiming convention expenses.
Meals and entertainment – When it comes to any meals and entertainment (M&E) expenses, you can only deduct 50% of the expenses from business income. The same goes for M&E expenses incurred for a convention. If your convention expense included M&E, you will only be able to claim 50% of the amount specified as meals and/or entertainment.
If the convention fee does not specify a separate amount for meals and/or entertainment, $50 a day will be deemed M&E. As such, you will only be able to claim $25 per day.
Employees – Convention expenses must be deducted from business income. This means employees can’t claim deductions for convention expenses. If, however, you reimburse the employee, the expenses won’t be a taxable benefit, unless there’s a personal benefit for the employee attending the convention. In these cases, the reimbursement may or may not be a taxable benefit.
As you can see, convention expenses can be very complex due to the number of qualifying elements and exceptions. For help managing your convention expenses and other accounting and finance tasks for your business, please contact us today.