Employment Expenses for Commission Salespersons

A June 17, 2026 Tax Court of Canada case considered an employee's deduction of $86,231 in fees paid to a corporation he controlled.

The taxpayer earned commission income and used the corporation to prepare a business plan intended to increase future sales. The work was subcontracted to the taxpayer's son.

The corporation also had approximately $500,000 of non-capital losses, meaning the fee would not generate immediate corporate income tax.

Taxpayer Loses

Although the employer required the taxpayer to prepare a business plan, the employment agreement did not require the taxpayer to hire and personally pay a third party to prepare it.

The court emphasized that an employment contract must generally require both:

• The employee to perform the activity; and
• The employee to personally incur the related expense without reimbursement.

The court also found that the amount had not actually been paid before the end of the taxation year. For this type of deduction, simply incurring the expense was not sufficient.

Even if all other conditions had been satisfied, the court concluded that the amount claimed was unreasonably high. It estimated that a reasonable amount would have been approximately $21,558.

Action: Commission employees should ensure that their employment agreement actually requires them to incur an expense and that the expense is paid in the appropriate year.