TAX BREAKS
CANADIAN ART CAN BE TAX DEDUCTIBLE
The Canada Revenue Agency (CRA) offers an intriguing tax incentive for individuals and businesses purchasing or renting Canadian artwork, aiming to encourage the support and appreciation of local art. This incentive is particularly beneficial for those looking to enhance their workspaces with cultural and artistic elements. Here's an expanded view of this provision:
Tax Deduction for Artwork Purchase or Rental:
- Eligibility: Individuals or businesses that acquire Canadian artwork for display in personal offices or public areas such as lobbies and hallways are eligible for tax deductions on these expenses.
- Artwork Use: The artwork should be displayed in a business environment, contributing to the aesthetics of the workplace.
Amortization Expense Treatment:
- Capital Cost Allowance: Artwork purchases can be considered as an amortization expense. This means that instead of being treated as a regular expense, the cost of the artwork can be capitalized and deducted over several years under the capital cost allowance (CCA) system.
- Gradual Deduction: This system allows for the gradual deduction of the artwork’s cost, spreading it over its useful life, thereby reducing the taxable income of the business or individual over a period of time.
Consultation with an Accountant:
- Professional Advice: Given the complexities of tax laws and the specifics of each case, consulting with an accountant is advisable to ensure compliance and optimal tax benefit.
- Personalized Tax Planning: An accountant can provide personalized advice, taking into account the specific circumstances and needs of the individual or business.
GST Input Tax Credits:
- Recovery of Taxes Paid: If the buyer is registered for the Goods and Services Tax (GST), they may be eligible to recover the taxes paid on the artwork through input tax credits.
- Offsetting GST Liability: This means that the GST paid on the purchase or rental of the artwork can be offset against the GST collected from customers, reducing the net GST payable.
Considerations and Eligibility Criteria:
1. Artwork Value: The value of the artwork must exceed $200 to qualify for these tax benefits.
2. Purpose of Artwork: The artwork should not be intended for resale or form part of any inventory. Its primary purpose should be for display in a business environment.
3. Creator's Nationality: The artwork must be created by a Canadian artist, supporting the local art community.
Business and Cultural Benefits:
- Enhancing Workplace Environment: Displaying Canadian artwork can enrich the work environment, showcasing a commitment to culture and the arts.
- Supporting Local Artists: Purchasing local artwork supports Canadian artists, contributing to the cultural and economic vitality of the local art scene.
In summary, the CRA’s provision for deducting expenses related to the purchase or rental of Canadian artwork serves dual purposes: it offers a financial incentive for businesses and individuals, and it fosters a supportive environment for Canadian art and artists. However, it is essential to understand the specific criteria and consult with a tax professional to maximize the benefits and ensure compliance with tax laws.
To be eligible, the artwork must meet the following criteria:
1. Its value must be above $200.
2. It cannot be intended for resale or part of any inventory.
3. The creator must be a Canadian artist.