Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
PRINCIPAL ISSUE:
Can taverns providing free beverages to their customers be excluded from the application of subsection 67.1(1) of the Act because the business fulfils the requirements of paragraph 67.1(2)(a) of the Act?
Position TAKEN:
Yes, if the taverns provide these beverages in the ordinary course of their businesses and in expectation of a compensation.
Reasons FOR POSITION TAKEN:
The expression "in expectation of a compensation" contemplates the probability of an event happening and does not require a direct connection between the compensation and the product.
911270, 5-7245 and 921136
5-940798
XXXXXXXXXX L. Roy
May 16, 1994
Dear Sir:
Subject: Limitation on food, beverages and entertainment expenses
This is in reply to your letter of March 28, 1994 in which you requested our opinion on whether the expense limitation under subsection 67.1(1) of the Income Tax Act would apply to taverns providing free beverages to their customers.
All references to statute are to the Income Tax Act S.C. 1970-71-72, c.63, as amended, consolidated to June 10, 1993 (the "Act").
The situation described in your letter appears to involve actual transactions with identifiable taxpayers. Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R2, dated September 28, 1990. Where the particular transactions are completed, the enquiry should be addressed to the relevant district taxation office. The following comments are, therefore, of a general nature only, and are not binding on the Department.
Paragraph 67.1(2)(a) of the Act provides an exception to the restriction set out in subsection 67.1(1) of the Act. The exception applies where an amount is paid or payable for food, beverages or entertainment provided in the ordinary course of a person's business of providing food, beverages or entertainment for a compensation or in expectation of a compensation.
Since the ordinary course of business of taverns is presumably to carry on a business of providing beverages for a compensation or in expectation of a compensation, it is our opinion that subsection 67.1(1) of the Act would not apply to restrict the amount deductible in respect of free beverages (e.g. free round of drinks) provided occasionally by taverns to their customers.
We trust the above comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1994
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1994
Email this Content