Most of the time, the maximum that you can claim for meals and entertainment expenses is 50% of the lesser of: (a) the actual cost you incur, or (b) an amount that is “reasonable”.
Also, there are special rules for foot and bicycle couriers, and if you are a long-haul truck driver who is eligible for higher deduction rates.
TAX TIP If your business is registered for GST/HST, you can only claim an ITC input tax credit for the portion of the expenses that are deductible for income tax purposes. For most meals and entertainment costs, the ITC would only be for 50% of the GST/HST. The other remaining 50% of the GST/HST is not deductible for tax purposes. Please contact us now for professional advice regarding all your meals and entertainment expenses.
Sometimes, 100% of meals and entertainment are fully deductible, including:
- when meals and entertainment are provided as compensation to customers, and you are in the business of providing meals or entertainment like a restaurant
- when the meals and entertainment are billed to your customers and you show these costs on the invoice
- when the meals and entertainment are for a party (e.g. Christmas party or similar event) and you invite all employees (limited to six such events each year)
- when you incur meals and entertainment for a fund-raising event mainly for the benefit of a registered charity
- when you include the meals and entertainment in your employee’s income
- when you incur meals and entertainment expenses in other unique circumstances like an employee located at a remote or special work location or being housed at a temporary work location
TAX TIP Beginning in 2018, where you provide a free party or other social event to all your employees and the cost is $150 per person or less (was previously $100), Canada Revenue Agency will not consider it to be a taxable benefit included on his/her T4 slip. However, if the cost is greater than $150 per person, the entire amount is a taxable benefit. Additional costs like transportation, taxi fare and overnight accommodation are not included in the $150 per person amount. Please contact us now for professional advice on these and other important matters.
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