Are Staff Parties And Gifts Tax Deductible?
Posted On: 14/12/23 - 0

It’s that time of the year again, a time for gift giving and parties to show staff and clients appreciation for their support all year. Many new business owners wonder if these staff parties and gifts are tax deductible? During this Christmas season know what is and isn’t tax deductible.

Staff Christmas Parties

Staff parties are a great team builder. A way to show appreciation for everyone’s dedication to the company all year. Normally, there is a deduction of 50% for meals and entertainment as a business expense. However, the CRA rules for company wide in person parties are different.

The event has to follow certain CRA guidelines. If they are followed, 100% of the expense can be deducted. Firstly, to qualify for the total deduction, the staff party must be open to all employees of the company. Secondly, the cost of the party must not be more than $150.00 per person. Spouses are included when calculating per person costs.

Are Staff Virtual Christmas Parties Tax Deductible?

The CRA criteria is different for virtual company events. The cap is $50 per person. This is to cover the cost of meals, beverages and delivery. If there is entertainment at the virtual event, then the per person cap is $100. Spouses are not included in the per person cost for virtual parties.

What About Non-Cash Employee Gifts?

Many entrepreneurs want to show appreciation by gifting their employees during the holiday season. Many gifts are considered a taxable benefit. The value of the gift dictates whether it is taxable or not. There are no tax implications if the gift is $500 or less. Anything beyond $500 would have to be added to the T4 as additional income and be taxed accordingly. This $500 cap is per year.

Gifts Cards To Employees

All cards need to be $500 or less in total for the year. These have to be from a retailer, or group of retailers and cannot include prepaid visas or anything that can be converted to cash.

Is Tax Paid On Client Appreciation Gifts?

As per the CRA, you may deduct all reasonable business expenses that are considered gifts to clients. Entertainment and meals for clients, such as hockey tickets or a meal out to a restaurant can be expensed for half of the value.

Tax laws and deductions are ever changing not only during holiday season but all year round. Be informed on the latest tax news by contacting our office to speak to a tax specialist today.

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