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Meals and Entertainment

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Business -> Meals and entertainment

What meal and entertainment costs can I deduct?

Income Tax Act s. 67.1

In general, expenses incurred in order to earn business or property income are tax deductible.  However, there are limitations on some expenses, including meals and entertainment.

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Most of the time, the amount that can be deducted for food, beverages and entertainment is 50% of the lesser of

bullet the actual cost, or
bullet a reasonable amount under the circumstances

Canada Revenue Agency's information on meals and entertainment expenses  explains allowable meal deductions which can be claimed without keeping receipts, for self-employed foot and bicycle couriers and rickshaw drivers for the cost of the extra food and beverages they must consume in a normal working day (8 hours) because of the nature of their work.  For 2006 and later taxation years, a daily flat rate of $17.50 can be claimed.  Log books would still be needed to slow the days worked and the hours worked on each of these days.

There is a higher allowable deduction for meal costs during eligible travel periods of long-haul truck drivers, which are deductible at the following rates:
bullet 65% for 2008
bullet 70% for 2009
bullet 75% for 2010, and
bullet 80% for 2011 or later.

A long-haul truck driver is an individual whose principal business or principal duty of employment is driving a long-haul truck which transports goods.

A long-haul truck is a truck or tractor designed for hauling freight, with a gross vehicle weight (GVW) of more than 11,788 kilograms.

An eligible travel period is a period of at least 24 continuous hours throughout which the driver is away from the place of work, and is driving a long-haul truck that transports goods to or from a location that is at least 160 km from the place of work.

Sometimes, 100% of meals and entertainment are deductible, including:

bullet when meals and entertainment are provided as compensation to customers, and you are in the business of providing meals or entertainment (e.g. restaurant)
bullet when the meals and entertainment are billed to your customer, and are itemized on the invoice
bullet when the meal and entertainment costs are included in an employee's income, or would be included if the employee did not work at a remote or special work location, and the expenses are not for a conference, seminar or similar event
bullet when meal and entertainment expenses are incurred to provide a party (such as a Christmas party) or event to which all employees from a particular location are invited (limit of 6 of these events per year).  The cost will be 100% deductible even if clients are invited as well as all employees.
bullet when meals are provided to employees housed at temporary work camps installed for the purpose of providing meals and accommodation to employees working at a construction site, and the employee cannot be expected to return home daily.
bullet when the meal and entertainment expenses are for a fund-raising event, the primary purpose of which is to benefit a registered charity

If you are a GST/HST registrant, you can only claim an input tax credit for the portion of the expenses that are deductible for income tax purposes.  For most meals and entertainment, the input tax credit would be for only 50% of the GST or HST paid.

If you are an employee of a transport business, you may be able to claim the cost of meals and lodging, including GST/HST or PST, as a deductible employment expense.  You may be able to get an employee GST/HST rebate.

If your corporation has paid expenses incurred to earn business or property income, and these expenses are not deductible for tax purposes, the non-deductible amount is added back to income on the tax return.

If your unincorporated business has paid expenses incurred to earn business or property income, and these expenses are not deductible for tax purposes, the non-deductible amount is excluded from expenses in the statement of business or professional activities included with the tax return.

Canada Revenue Agency (CRA) resources:

bullet IT518R Food, Beverages and Entertainment Expenses
bullet GST/HST input tax credits for meals and entertainment expenses
bullet Meal expenses of long-haul truck drivers

 

Revised: March 12, 2014

 

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