Can I Claim Professional and Legal Fees as a Business Expense in Canada?
Yes, professional fees paid to accountants, lawyers, consultants, and advisors for advice related to earning business income are fully deductible. Legal fees for capital transactions (incorporation, share purchases, property acquisitions) are not deductible as expenses but are added to the adjusted cost base (ACB) of the asset.
Finn does your books in Canada
AccountsOS keeps the books for Canada businesses, tracks tax deadlines and handles expenses, in plain English. Ask Finn about yours, no signup needed.
What Canada Revenue Agency (CRA) says
CRA allows deduction of professional fees under the general business expense rule when incurred to earn income from business. Fees must be reasonable. CRA's guide to business expenses says legal and accounting fees for business advice, record keeping help and preparing income tax and GST/HST returns are deductible, and so are fees for objections or appeals, reduced by any reimbursement received. Legal and accounting fees that are capital in nature, such as legal fees to buy capital property, are added to the cost of the property and not deducted. Loan financing fees are deducted over time and not in one year.
When you can claim
- Annual accounting and bookkeeping fees for preparing financial statements and the T2 return
- Legal fees for drafting commercial contracts, employment agreements, or lease negotiations
- Management consulting fees for operational or strategic advice
- Fees paid to a tax advisor for restructuring advice related to operations
- Collections legal fees to recover amounts owed in the normal course of business
When you cannot claim
- Legal fees for incorporating the business (capital expenditure, not deductible)
- Legal fees for purchasing shares or a business (added to the ACB of the shares/assets)
- Fees for defending against criminal charges (not incurred to earn business income)
- Personal legal fees or personal tax return preparation
Good to know
Pro tip: Ask your lawyer to separate invoices for capital-related work (e.g., share purchase agreements) from operational legal work (e.g., contract reviews). This makes it straightforward to deduct the operational fees and add the capital fees to the ACB without guessing at an allocation.
Important: Fees to appeal an assessment are deductible but must be reduced by any amount the CRA or a court awards back. Separate those fees from fees for advice on a share sale or incorporation, which are capital.
Stop guessing what you can claim in Canada
AccountsOS automatically categorises expenses with Canada Revenue Agency (CRA)-aware rules and tells you exactly what is claimable.
Try Free