According to the National Golf Course Owners Association of Canada (NGCOA), the tax rules are too restrictive and unfair and do nothing to help the industry.
In the past few years, the golf industry has been running out of steam. According to data provided by the industry, golf courses may be counting on the same number of members, but these are playing fewer rounds than before. This results in decreased revenues for the golf clubs, which are left to their own devices to find ways of attracting new members. Even tournaments, which used to be very popular in the past, are no longer pulling in considerable amounts of money for the golf clubs.
Despite all of its efforts to attract players, the NGCOA believes that golf expenses are not treated fairly which makes it very difficult for golf to compete with other entertainment industries.
Review of applicable tax rules
In general, taxpayers in business can deduct any reasonable expense incurred for earning business income as long as this expense is not expressly forbidden. Expenses incurred for using a golf course constitute precisely an expressly forbidden expense. So, taxpayers in business cannot deduct the cost of a round of golf when they invite a client.
The same restriction also applies to golf tournament registration costs. Since this expense was incurred to use a golf course, no amounts are deductible. The same treatment applies to annual golf club membership fees. Unfortunately, no portion can be deducted.
What about meal expenses?
If you pay for a meal before or after a round of golf, only 50% of the invoice can be deducted as entertainment expenses. There was a time when the tax authorities refused deductions for meals taken at a golf club. Luckily, they have changed their mind and accept a 50% deduction. When the cost of meals is included in a tournament’s registration expenses, unfortunately, deductions are not possible. The portion of the cost of the meal is what’s important if you want to benefit from a deduction. Without this information, no portion is deductible.
During your company’s annual golf tournament, remember that all expenses incurred by an employer for food, drink or entertainment offered to the employees are not subject to the 50% limit. Rather, they are entirely deductible. This exception is limited to a maximum of six events per year for each of the employer’s establishments on the condition that all employees be invited.
- If the golf tournament in which you participate has a charitable cause, make sure to issue receipts in order to claim your credit for charitable donations.
- When choosing your business development activities, remember that the tax authorities will allow you to deduct a portion of the cost of a ticket to attend a cultural or sports event (music show, soccer or hockey game, Formula One Grand Prix, etc.), but no amount can be deducted for bringing a client to play golf.
This article appeared in the July 11, 2018 issue of the Journal de Montréal and the Journal de Québec. Sylvain Moreau is a Tax Partner and a columnist for the Argent – Dans vos poches section.