It’s the start of the Christmas rush, and if you’re a business owner, you’ve probably already booked a room or a caterer for your office holiday party. But along with planning the date and the dress code, did you know you can plan your tax considerations, too?
According to Canada Revenue Agency, social events that employers put on for their entire staff are not a taxable benefit, provided the cost is $100 per person or less. That includes room rental, food, drink, your Uncle Joe in the Santa Suit and the carolers you’ve hired from the performing arts school. So long as the total costs for your 10-person office add up to $1000 or less, it’s not a taxable benefit for your employees. You, on the other hand, get to deduct the entire amount.
It Pays to be Moderate
Should the holiday cheer flow freely, here are some additional expenses that do NOT fall into the Social Event category. According to the CRA, “transportation home, taxi fare, and overnight accommodation are not included in the $100 per person amount.” You will need to account for these separately, or encourage your employees to arrange their own ride home or overnight stay once the party is over.
Furthermore, once you splash out on a party that costs more than $100 per person, the CRA considers your extravagance to be a taxable benefit for your employees. At that point the entire cost, including the additional costs, is a taxable benefit.
If you are the type of office that enjoys spending social time together, you have up to six opportunities per year to bill your staff fun to office expenses and expect a tax deduction, provided you adhere to these rules. We would be happy to keep track of your staff parties and their expenses for you, so you can maximize your tax credits. Contact us for a conversation about this, and other ways to prepare for tax season.
NOTE: Canada Revenue Agency is currently reviewing this part of the tax code (Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employment), and it could change. For now, party like it’s 2016, but don’t go overboard.