PURCHASING CANADIAN ART - TAX INCENTIVES
The Canadian government has recognized the importance of encouraging the Canadian art market and its creators and they have implemented tax incentives intended to promote the purchase of Canadian artwork.
Buying artwork; paintings, drawings, sculptures, photographs, etc. is considered as an amortization expense for corporations or individuals who operate a business in Canada. It qualifies as a tax deduction provided that certain criteria are met.
The artwork must have been created by a Canadian artist and must be related to the business’s commercial activities, for example, it must be exhibited in a place of business where it will be seen by clients. If the purchase meets these criteria, the buyer is entitled to a declining deduction of the cost of purchasing the artwork at both the provincial and federal level. Speak to your accountant about specifics.
Some works of art are, however, excluded and do not qualify for a tax credit, more specifically works having a value of less than $200 or created prior to the 1900s – created over 100 years ago.
Moreover, if the buyer is a GST, PST, HST or QST registrant, he can recover the taxes paid at the time of purchasing the artwork by claiming input tax credits. Lastly, if the work is rented instead of being purchased, the rental expenses are also deductible as long as the expense was made for business purposes.