CRA confirms what is a non-deductible expense for safe income purposes

When asked to confirm what are non-deductible expenses in the context of the CRA policy that such items must be deducted in computing safe income on hand, CRA indicated that non-deductible expenses generally are cash outflows which are not deducted in computing a corporation’s income for ITA purposes, other than an expense or disbursement made for the acquisition of property or for the repayment of the principal amount of a loan. Examples include:

• dividend paid or payable;
• taxes, including refundable taxes;
• non-deductible interest and penalties;
• charitable donations, gifts and political donations that are not already deducted in net income for tax purposes; and
• the non-deductible portion of expenses or expenditures such as the non-deductible portion of meal and entertainment expenses.

In addition, 2016-0672321C6 states that contingent liabilities and accounting reserves also need to be taken into account.

Neal Armstrong. Summary of 15 June 2021 STEP Roundtable, Q.9 under s. 55(2.1)(c).