Many owner/managers, employees and self-employed individuals are now planning their attendance at conventions throughout 2005.
If you are planning to attend a convention this year, be sure to consider the tax implications of the costs in view of the applicable taxation rules. Some convention expenses are deductible in whole and some in part. Other expenses may be considered personal and not eligible to be deducted as business expenses.
Under the Income Tax Act, reasonable expenses incurred for an individual's attendance at professional or business conventions and conferences are tax deductible for corporate businesses, self-employed individuals and partnerships if attendance is for a business purpose. However, some restrictions apply for meals and entertainment and the additional costs of your spouse or partner accompanying you. Employees who attend a conference for business purposes may or may not have a tax liability for convention expenses covered by their employer, depending on the circumstances.
While generally you may deduct convention fees and all travel and accommodation costs in their entirety, you may only deduct the costs of two conventions in any one year. A corporation is generally subject to the same two conventions per year in connection with its business but it may send more than one representative to each convention. However, the CRA's administrative position is that the limit is applied to each business interest of the corporation. For example, the limit of two conventions for a large corporation would apply to its various business interests of personnel, accounting, production, etc.
For tax purposes, the conventions must:
• Relate to your business or professional activity; and
• Be held by a business or professional organization within the geographical limits of where the sponsor of the convention usually carries on business.
This second limit means that a convention sponsored by a Canadian business or professional organization must be held in Canada where the organization is national in character or in the particular province, municipality or area if the organization's activities are limited to such an area.
Expenses incurred attending a convention held outside the geographical limits of the Canadian organization will normally not be an allowable deduction. However, under the Canada-United States Tax Convention, expenses incurred by a Canadian resident or citizen attending a convention sponsored by a Canadian organization and held in the U.S. are treated as if the convention were held in Canada if the convention is held by a national organization. A provincial organization holding a convention in the U.S. would be outside of the territorial limits of the organization and the expenses therefore would not be deductible.
In addition, you can deduct reasonable expenses incurred for attending a convention in another area or country if the convention is sponsored by an organization of that area or country and it is related to your business or professional practice.
If your spouse or children accompany you to a convention, these expenses are normally considered to be personal and, as such, are not deductible. Similarly, the incremental costs of a vacation, which are combined with the convention, would not be deductible.
Meals and Entertainment
The registration fees for a convention will sometimes include the cost of food, beverages, or entertainment. If these amounts are not shown separately on your bill, you must subtract $50 from the total convention fee for each day the organizer provides meals and entertainment. You can then claim this amount as an expense under meals and entertainment, of which 50% is deductible. (Note that incidental items such as coffee and doughnuts that the organizer provides at meetings or receptions at the convention are not considered to be meals and entertainment.)
You can also claim the costs of meals and entertainment that are not included in the convention fees, subject to the 50% deduction.
If your employer requires you to attend a convention and you are reimbursed for your costs, the reimbursement is normally not taxed in your hands. You are not entitled to deduct any of the costs of attending a convention in computing your own personal income. However, some portion of the amount paid by the employer could be considered a taxable benefit in some circumstances, for example, if the employer covers any of the costs of your combining a holiday with the conference.
If your spouse or partner accompanies you to the conference and your employer pays, or reimburses you for this additional cost, the amount is considered a taxable benefit in computing your personal income. The exception is where your employer has requested that your spouse accompany you to help you achieve the business objectives of the trip. In that instance, the amount paid for your spouse's travel and accommodation would not be considered to be a taxable benefit.
Some Tax Tips
Make sure you can back up your convention expense claims.
• Keep your convention registration form and receipt, session outline and receipts for travel, accommodation and other expenses.
• If the registration fee will include meals and entertainment, ask if these costs are shown as separate items on the receipt. Otherwise, the $50 a day rule applies.
• If you attend a conference outside of North America, make sure you can show the relevance of the convention to your business.
• If you combine a vacation with a conference, be sure to keep separate records of your personal versus business expenses. While the business expenses are deductible, the personal expenses for the vacation portion of your trip are not. If you are an employee, the personal portion is considered a taxable benefit and taxed in your hands.
• If your employer requests that your spouse accompany you to the conference, ask that this request be provided in writing and keep this with your other conference documentation.Conventions can be revitalizing and can help boost your productivity. They not only help you find practical strategies and solutions that can be applied to your business but also offer valuable opportunities to learn about new materials and products as well as share ideas with others in your sector. Since the rules limit the deductibility to just two conventions each year, carefully research the many offerings to ensure you maximize the investment of your time and money.
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