CRA Increasing Reviews: Corporate Advertising and Promotion Expenses

Over the past few years, CRA has taken a targeted approach in reviewing amounts claimed under specific lines (based on the type of claim) of a corporate tax return. Various projects conducted included reviews of professional fees, travel expenses and the purchase of certain vehicles. CRA has recently focused their efforts on advertising and promotion expenses claimed by corporations. As part of this most recent project, CRA is asking for the following:
– A detailed list of the transactions (or the general ledger entries) related to the expenses.
– A copy of the invoices and receipts for the ten largest transactions included in the expenses.

While there are many reasons to obtain this type of information, CRA may be analyzing whether any amounts deducted were personal, not wholly or partially deductible, or should have been capitalized. For example, provided no exceptions are available, amounts paid for food, beverages or entertainment are only 50% deductible to the corporation. Also, green fees for golf
and membership fees in a golf club are not deductible regardless of whether they are incurred for business purposes.

ACTION: Be aware that additional CRA activity in these areas could result in extra time and administrative costs.

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