Tax Incentives for Buying Canadian Art
Did you know that the purchase of original Canadian art in Canada is tax deductible?
Art can do more than transform a blank wall or enliven a space. Collecting Canadian art has grown into one of the most popular types of investments.
The Canadian government has implemented attractive tax incentives to promote the purchase of original Canadian works of art.
The Canada Revenue Agency (CRA) has established that taxpayers who purchase or rent Canadian artworks, either for their personal office or for the common areas of their places of business (such as the lobby or hallway) can claim a tax deduction for the cost of purchasing or renting the work.
Buying artwork (paintings, etchings, sculptures, drawings, photographs, etc.) is considered as an capital expense for corporations or individuals who operate a business. An individual or organization may quality for an annual tax deduction provided certain criteria are met.
If you own a business, there are some great tax benefits to collecting Canadian Art.
Under the Tax Act, this purchase must meet the following criteria:
1. The artwork must have been created by a Canadian artist and must be related to the business’s commercial activities and exhibited in a place of business where it will be seen by clients.
2. A print, etching, drawing, painting, sculpture, or other similar work of art that is greater than $200 in value
3. Made by a Canadian artist at the time the art was created, whether a Canadian citizen or a permanent resident
4. If the buyer is a GST and 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.
If the purchase meets these criteria, the buyer is entitled to a declining deduction of 33% of the cost of purchasing the artwork (class 8.1) at the provincial level and of 20% (class 8) at the federal level.
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.
We strongly recommend you contact a Chartered Professional Accountant regarding the specifics of your purchase to determine if it will qualify for a deduction.