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Home  ->  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.

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

Self-Employed Foot & Bicycle Couriers and Rickshaw Drivers

Canada Revenue Agency's (CRA) information on meals and entertainment expenses for sole proprietorships and partnerships 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 show the days worked and the hours worked on each of these days.

Meals Deduction for Long-Haul Truck Drivers

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.

When are Meals & Entertainment 100% Deductible?

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.  However, see the information below re possible taxable benefit to 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

Transport Business Employees

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.

Non-Deductible Expenses

Corporations

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 on Schedule 1.

Unincorporated Businesses

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.

Employer Provided Social Events - Taxable Benefit To Employees

Technical Interpretation 2017-073125117 indicates that CRA's position is that there is a taxable benefit to employees who have attended a social event provided free of charge to all employees, where the cost exceeds $150 per person.  There is no taxable benefit for employees who did not attend.

New/Updated CRA Administrative Policy December 2022 re Employer Provided Social Events

In-person (or combined in-person and virtual) social events provided to employees

If a free party or other in-person social event is provided by the employer, the benefit is not taxable if all of the following apply:

bulletIt is available to all employees
bulletCost is $150 or less (including taxes) per person:
bulletpersons includes spouses or common-law partners
bulletancillary costs (such as transportation home, taxi fare, overnight accommodation for in-person social event attendees are not included in total cost limit for the event.
bulletIf you provide gift cards to your employees attending virtually for meals, beverages and delivery service the card must meet all the following conditions for the card to be considered non-cash:
bulletcomes with money already on it, and can only be used for purchases from a single retailer or group of retailers identified on the card
bulletcannot be converted into cash
bulletlog is kept to record gift card information containing all of the following:
bulletEmployee name
bulletDate the card was provided to the employee
bulletReason for providing the gift card
bulletType of gift card
bulletAmount of gift card, and
bulletName of the retailer
bulletThis includes gift certificates, chip cards and electronic gift cards.  If the card does not meet these conditions it is considered a near-cash benefit and is taxable.
bulletThe event its within the maximum annual limit for social events (total of six employer-paid combined in-person and virtual social events)

If the total cost for the event (not including ancillary costs) is more than the limit per person, the full amount is taxable.  In this case, the ancillary costs and the cost of the attendance of the spouse or common-law partner must be included in the income of the employee.

Virtual social events provided or reimbursed to employees

Virtual social events are not taxable if all of the following apply:

bulletIt is available to all employees
bulletIf the virtual social event:
bulletOnly includes meals, beverages and delivery services, the total cost is $50 or less (including taxes) per employee, or
bulletIncludes meals beverages, delivery services and entertainment, the total cost is $100 or less (including taxes) per employee
bulletIf gift cards are provided to the employees for meals, beverages and delivery services, the card must meet all the conditions noted above, to be considered non-cash,
bulletIf expenses are reimbursed, the employee must send you receipts, and
bulletThe event its within the maximum annual limit for social events (total of six employer-paid combined in-person and virtual social events).

If the total cost for the event is more than the limit per person, the full amount is taxable.

See CRA's Withhold payroll deductions and remit GST/HST re non-cash, near-cash and cash benefits that are taxable to the employee.

GST/HST on Meals and Entertainment

Income Tax Act s. 67.1, 12(1)(x), 20(1)(hh), 248(18), Excise Tax Act s. 236

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.  Interestingly, the other 50% of the GST or HST paid is not deductible for tax purposes.  CRA issued Technical Interpretation 9830806 (pdf) on this in 1998 explaining the reasoning.  For a GST/HST registrant, the following would be the result of spending $114 on a meal ($100 + $14 HST):

Detail Amount
Total spent on meal $114
Less input tax credit -7
Less amount to be added back on tax return   -57
Deductible amount of meals expense $50

If you are self-employed, the $57 which is not deductible could be posted to owners drawings as an alternative to adding it back on the tax return.

If you are not a GST/HST registrant, the amount to be added back on the tax return would be 50% x $114, or $57.

TaxTips.ca Resources

Employees - Taxable Benefits and Tax-Free Benefits

Canada Revenue Agency (CRA) Resources

Social events and hospitality functions

Withhold payroll deductions and remit GST/HST re non-cash, near-cash and cash benefits that are taxable to the employee.

IT518R Food, Beverages and Entertainment Expenses (Archived)

GST/HST input tax credits for meals and entertainment expenses

Meal expenses of long-haul truck drivers

Revised: July 31, 2023

 

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