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Travel expenses

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When an employee or a self-employed individual travels out-of-town for business purposes, the related expenses are tax-deductible for either the company or the self-employed individual. You must always be able to establish that the expenses are closely related to the business in question. For example, expenses such as movies, long-distance charges to home, haircuts and magazines are dubious travel expenses. Meals for people other than the individual traveler can be covered under "Meals and Entertainment" only if the other diners are customers or potential customers of the business, as opposed to friends, relatives or other employees of the business. Only 50% of meals and entertainment expenses are tax-deductible in Canada. A business trip which is combined with a personal or pleasure purpose is still deductible except that the personal portion must be extracted. Since the airfare would have to be incurred for business purposes in any case, there is no need to prorate the airfare between business and personal-use. The same applies for the cost of the hotel if part of each day is for personal purposes. However, if the business portion of the trip has ended and the individual remains there for a few more days strictly for personal purposes, he can no longer claim hotel, meals and other similar expenses for business use. If you are an employee of a company and you have traveled for business purposes and have not been reimbursed by the company, then you can deduct these expenses from your personal tax return if the company has authorized this with a Form T2200. If you have been given a travel advance by the company, you must keep track of actual travel expenses so that the company can collect back any excess of the advance over actual expenses and deduct only the actual expenses from its corporate tax return. If your spouse accompanies you on a business trip and your spouse's travel expenses are paid by your employer, they must be included as income on your personal tax return since they are considered a taxable benefit, unless your spouse was engaged in business activities on behalf of your employer during the trip. The same principal applies to the personal portion of a combined business/pleasure trip if the employer has paid for the personal as well as the business portion.

The above has been summarized and does not include all of the implications affecting a particular individual, which could vary according to the circumstances. Please contact us if you need further assistance with any of these points. Click here for additional contact information

Travel Expenses | Simkover and Associates Chartered Accountants

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