So ran the headline on a promotional article on retiring in Belize or some such place. Let us start by saying that we have nothing against retiring, retiring in Belize or the sun. We just like to be near cities, books, cafés, buildings with some history and access to a good mediterranean meal or two. To each their own.
So does that mean that you have to pay for your vacation? Not necessarily and here comes those great words: “it depends.”
Some people like to travel. Travelling on pre tax dollars (that means that you can deduct the cost of the travel before you pay income tax on the balance) has a great advantage. But is it legal? Will you get in trouble? Is it right for you?
Let’s start with the basics. You can deduct costs that help you make a profit. Profit is the key word here. Revenue Canada (consult a local tax expert) does not want to “fund” endless losses by allowing you deductions against other income. Then again, Canada Revenue Agency does not determine what is a business by the volume of sales or by your intentions. They define a business as "any activity that you do for profit.”
So how does that help you? Well let’s use the example of Erin who owns a coffee shop.
She wants to go to Jamaica on a holiday. Is it tax deductible? Yes? No? Maybe?
What did you answer? If you said maybe we think you are right. You see Jamaica produces the famous coffee beans grown in the specially designated area of the Blue Mountains. The coffee has blue green color, good acidity, intense aroma, fairly good body, clean. So what? Well, if Erin is going there to negotiate a distribution deal with the distributor and it is sizable, does that change the facts?
What if the business pays for the trip and has board approval – Erin is a minority owner – does that change the facts?
It is a matter of facts, reasonableness, profitability and planning.
So if the trip is planned right, Erin can indeed get a paid vacation – at least in part. How about if Erin also went to several places – restaurants, cafes and bistros to see how they were marketing the coffee and food related products? How about if Erin gave some paid advice to some of these establishments?
By understanding what is necessary, you can plan to make the facts fit the trip.
Too much of a bother? Wait, who says that you can’t go to the beach in the morning, try the coffee shop on the beach for some market research and then spend the hot afternoon doing some business? Can you bring along your significant other? Well it depends - are they taking notes, being a confidante, maybe a mystery shopper that writes reports?
Are you having fun? The entrepreneurs that we know do this ‘market research’ when they travel anyway…so why not do it in Jamaica, Colombia, Brazil or Italy (or Greece)?
Remember planning is key.
Enjoy your travels.
This article was written in collaboration with Andion.
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