This worksheet calculates the amount of entertainment expenses that can be deducted and those that cannot be deducted for a corporation that carries on one or many businesses. The amounts of entertainment expenses that are not deductible are carried over to line 35 of Schedule CO 17.A.1, Net Income for Income Tax Purposes.
In Québec, to determine the deductible portion of entertainment expenses, you must take the lesser amount between 50% of the entertainment expenses and the limit based on the annual gross income.
The limit is calculated based on the following parameters:
|
Entertainment Expenses Limit for the businesses in the sale of goods |
Entertainment Expenses Limit for the other businesses |
||
|---|---|---|---|
|
Deemed Gross Income* |
Limit |
Gross Income* |
Limit |
|
Less than $32,500 |
2% |
Less than $32,500 |
2% |
|
More than $32,500 but less than $52,000 |
$650 |
More than $32,500 but less than $52,000 |
$650 |
|
$52,000 or more |
1.25% |
$52,000 or more |
1.25% |
* If the taxation year is less than 365 days, the applicable limit for the calculation of the entertainment expenses deduction will be determined based on the deemed gross income or gross income calculated proportionally as if the year was 365 days.
If the corporation carries on more than one business, a separate calculation must be made on the worksheet for each business using the annual gross income as well as the entertainment expenses for each business. The result of each separate calculation is added and the total is carried over to line 35 of Schedule CO 17.A.1.
To obtain more copies of the Entertainment - Entertainment Expenses Worksheet form, you must create copies of Schedule 125, Income statement information. This relationship between the two schedules now allows you to calculate separately the deductible and non-deductible entertainment expenses for each business within a single corporation. Each business may have its own limit calculation to determine its deductible and non-deductible portion of entertainment expenses.
A question has been added at the beginning of the form to determine if the business acts as an intermediate in the sale of goods. This question is used to determine the limit calculation that will be used, because it varies based on whether the business is or is not in the sale of goods.
Line 1, Entertainment expenses for the year
You must enter the total amount of entertainment expenses for the year, excluding expenses for food and beverages for long-haul truck drivers. If only one copy of Schedule 125 has been created, the amount of entertainment expenses on this line comes from Schedule 1 and the expenses for food and beverages for long-haul truck drivers are already excluded from this amount. If several copies of Schedule 125 have been created, the amount on this line corresponds to the amount entered on line 8523 of the corresponding G9367 form and does not exclude the expenses for food and beverages for long-haul truck drivers. Perform a separate calculation for each sector of activity where the corporation incurred entertainment expenses by completing another copy of this form.
Line 2, Entertainment expenses for the year deductible at 100% that are exempt from the limit
The entertainment expenses that are deductible at 100% and that are exempt from the limit are those affected by the exceptions listed in section 421.2 of the Taxation Act.
Line 3, Entertainment expenses for the year deductible at 50% that are exempt from the limit
The entertainment expenses that are deductible at 50%, but that are exempt from the limit are those affected by the exception respecting the 40 km rule in section 175.6.1 of the Taxation Act.
Line 4, Entertainment expenses for the year that are subject to the limit
It is the amount on line 1 minus the amounts on lines 2 and 3. The entertainment expenses subject to the limit are those that are deductible at 50% and that are not affected by any of the exceptions on lines 2 and 3. For more information on these exceptions, consult the explanations regarding lines 2 and 3 above.
Line 5, Annual gross income
The annual gross income from the GIFI is updated to line 5. If no amount is entered in the GIFI, but an amount is entered on line 17, Corporation’s gross income, of the CO-17 return, the amount on line 17 is updated to line 5. Note that the gross income from a partnership is included in this amount.
See also