The Canada Revenue Agency pretty much allows any necessary and reasonable business expense. It only has to be shown to be appropriate in the business's attempt to make money. Business expenses can be deducted for tax purposes, while other expenses such as living and personal expenses. which are not related to the business, are not allowed to be deducted from your tax responsibility.
A necessary business expense for one type of business may not be reasonable for another.
You can only deduct those expenses that relate directly to the business. For instance, equipment and vehicles purchases might be for both business and personal uses.
The business owner/taxpayer must separate the business usage from the personal us of the items and deduct only that percentage which is used for business. You must be prepared to back up your business expense claims with receipts. No having receipts will only make it difficult on the business owner who is claiming the expenses as deductions.
An audit could be grueling and drawn out, even more so without receipts or proof of claimed business expenses. Your business could be chosen to be audited even if you don't claim any enormous business expense deductions. So, every business should always keep their records meticulous at all times. Of course, keeping thorough records and receipts is just a good business practice, anyway.
What about marketing and promoting your business, is that deductible? Tax deductions don't apply to all types of business promotions. For instance, you can only deduct half the cost of promotional events that involve entertainment and food, such as business lunches. Also, Brochures and flyers can be deducted along with the cost of advertising in Canadian newspapers, Canadian TV and radio and websites. Internet businesses are taxable in Canada, not by collecting income taxes on how the business operates, but on what kind of business it is.
If the internet business is incorporated, then you file a T2 income tax return. If it is a sole proprietorship, then you file the Form T2124 (Statement of Business Activities), or Form T2032 (Statement of Professional Activities). Just like any other business, you will be able to claim appropriate business expenses relevant to the operation of your Internet business.