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
the actual cost, or
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:
65% for 2008
70% for 2009
75% for 2010, and
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:
when meals and entertainment are provided as
compensation to customers, and you are in the business of providing meals
or entertainment (e.g. restaurant)
when the meals and entertainment are billed to your
customer, and are itemized on the invoice
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
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.
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.
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:
It is available to all employees
Cost is $150 or less (including taxes) per person:
persons includes spouses or common-law partners
ancillary 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.
If 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:
comes with money already on it, and can only be used for purchases
from a single retailer or group of retailers identified on the card
cannot be converted into cash
log is kept to record gift card information containing all of the
following:
Employee name
Date the card was provided to the employee
Reason for providing the gift card
Type of gift card
Amount of gift card, and
Name of the retailer
This 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.
The 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:
It is available to all employees
If the virtual social event:
Only includes meals, beverages and delivery services, the total cost
is $50 or less (including taxes) per employee, or
Includes meals beverages, delivery services and entertainment, the
total cost is $100 or less (including taxes) per employee
If 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,
If expenses are reimbursed, the employee must send you receipts, and
The 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.
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.