Despite the fact that the purpose you advertise your product or service is to generate or increase sales, you may find your advertising expense is not tax deductible if you don’t know the rules.
Newspaper advertising
If you advertise your service or product to a Canadian audience in a newspaper distributed in Canada, the expense is not tax deductible if one of the following restrictions apply:
- The newspaper you advertise in is not owned by Canadians
- The newspaper is not edited by Canadian residents
- The newspaper is not printed in Canada or the United States
The idea is that the government doesn’t want Canadian businesses to use foreign newspapers to market primary in Canada. It is a way to encourage Canadians to buy Canadians.
Television and radio advertising
Similar rules apply for television and radio advertising. If you advertise on U.S. radio and television stations that are primarily directed to the Canadian audience, the advertising expense will not be tax deductible.
Magazine or periodical advertising
The rules for advertising on magazines or periodicals are somewhat different. You are eligible for either 100% or 50% tax deduction depending on the original Canadian editorial content provided in the magazine or periodical. 100% of your advertising dollars are tax deductible if the original Canadian editorial is at least 80%. Otherwise, you can deduct 50% of your advertising expense. Whether the magazine or periodical is Canadian owned or foreign owned is irrelevant.