Do You Understand Your Advertising Expenses?

Understand Advertising expenses

There is no doubt that advertising costs can become substantial, but perhaps you are thinking at least you can claim these expenses.

In many cases you are right in thinking this way, but don’t just assume that 100% percent of these costs is going to be a tax deduction.

Where you choose to do your advertising can have an effect on what you are able to claim by way of an expense.

The CRA really is more keen on allowing for advertising expenses that relate to that which is being offered to the Canadian market.   What this means is your advertising that is placed in Canadian newspaper or on Canadian television and radio can be fully claimed as an expense, including any finder’s fee.

If you are advertising in a periodical you can claim all the expenses for the ad material that is directed to the Canadian market. You must also be sure that the original editorial content is 80% or more of that particular issues total non-advertising content.  If it is less than 80% for the issue then you can only deduct 50% of your advertising expense that is directed at the Canadian market for that particular issue.

If you have decided to target the Canadian market but are doing so via a foreign broadcaster then you are not allowed to claim the expense.

So as you can see advertising expenses are not cut and dried as many people think.   Unfortunately there are a lot of different expenses that have specific rules attached to them, and many business people don’t realize this.

This is a good reason why you want to work closely with a professional like your tax accountant.   They know the rules and can quickly advise you about them if it appears that you are not following them.   Before just assuming that an expense can be totally claimed it is well worth discussing this with your tax professional.   By knowing ahead of time like in this situation with advertising it can help you make the right resource choices so you can benefit from a full expense instead of a partial one.

If foreign advertising is going to be more beneficial to you then of course you would not make the choice to delete it from your marketing and ad portfolio simply because you cannot claim it as an expense.

Some find this rule offensive when they are doing foreign business based in Canada and are paying Canadian taxes.   Unfortunately the law is the law and the only thing you can do is bring your concerns to your local politician and hope they will bring it to parliament.

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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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