Advertising and Promotion

Definition

Advertising and promotion costs include paid media (digital, print, broadcast), sponsorships, trade show booths, branded merchandise, public relations fees, and content production. They are deductible under the general s.18(1)(a) purpose test, but the Act disallows certain cross-border advertising aimed at a Canadian audience in order to support Canadian media businesses.

Key rules

• General rule: advertising that targets customers of the business is fully deductible when the amount is reasonable (s.67).
• Non-Canadian newspapers (s.19): advertising space purchased in a non-Canadian newspaper is non-deductible when the ad is directed primarily to a market in Canada.
• Non-Canadian periodicals (s.19.01): for foreign periodicals, the deduction is limited to 50% of the cost for publications whose original editorial content is less than 80% of total non-advertising content, and fully deductible if 80% or more is original. An ad in a non-Canadian periodical directed at a Canadian market is otherwise limited.
• Non-Canadian broadcasters (s.19.1): advertising on a foreign broadcasting undertaking directed at a Canadian market is non-deductible.
• Digital advertising: s.19 through s.19.1 on their face do not reach digital-only advertising (search, social, streaming). CRA historically treats digital ads placed with Google, Meta, and similar platforms as fully deductible. Canada's Digital Services Tax Act and ongoing policy consultations may change treatment of large platforms; monitor annual updates.
• Sponsorships: deductible if commensurate with promotional value received. Donations to a registered charity follow the charitable donation rules instead (s.110.1 for corporations).
• Capital vs. current: a long-life asset (a permanent illuminated sign, a website rebuild with multi-year useful life) may be capital. Annual campaign spend is current.

Example

Cascade Outdoor Inc. spends the following on 2026 marketing: $42,000 on Google and Meta ads targeting Canadian customers, $9,000 in a Canadian regional newspaper, $6,500 on a full-page ad in a United States magazine aimed at Canadian readers, and $14,000 for a trade show booth in Calgary.

The Google, Meta, Canadian newspaper, and trade show costs are fully deductible. The $6,500 United States magazine ad is subject to s.19.01; if the magazine's original editorial content is under 80%, only $3,250 is deductible, and if the ad is directed primarily to a Canadian market in a publication that fails to qualify, the full amount may be denied.

Common mistakes

• Treating a website rebuild with a multi-year useful life as advertising. It is generally capital, often Class 12 for off-the-shelf software or Class 14.1 for custom development.
• Running ads on United States broadcasters aimed at Canadian viewers and deducting the cost.
• Missing the s.19 test because the publisher is a Canadian subsidiary of a non-Canadian parent. Publisher citizenship matters, not ownership.
• Claiming the full cost of a golf tournament sponsorship where the host expects the company to pay green fees for staff. Green fees are still denied by s.18(1)(l).

Related concepts