How to Claim Meals and Entertainment Expenses in Canada?

Wouldn’t it be great if you could write off every penny you spend on meals and entertainment? Unfortunately, it’s not that easy.
Generally, CRA only allows you to deduct 50% of meal and entertainment expenses. However, there are a few special situations where a 100% deduction is possible. These exceptions include:

a) When you host a Christmas party or similar event and invite all employees from a certain location (limited to six such events per year).

b) When your employee is required to work at a remote work location if certain conditions are met.

What are Meals and Entertainment Expenses?
Meals and entertainment expenses are a part of your business and can be one of the deductions you claim. There are a few factors that go into this deduction and knowing how to properly track them will help you save money come tax time.
Meal and entertainment expenses can be anything from a quick lunch with a client to buying tickets to a sporting event to entertain your client. The key thing to remember is that these expenses are only deductible if they are related to your business and they help generate income. So if you want to save money and avoid issues with the Canada Revenue Agency, it’s best to keep detailed records of these expenses.
The CRA defines meals and entertainment expenses as any expense that covers food and beverages and other entertainment costs. This includes the price of a meal, tips, taxes and any other applicable charges. This also includes the cost of the entrance fee to a performance, concert or athletic event, as well as the costs of renting spaces for entertainment of clients (such as hospitality suites in hotels).
This of course does not include meals you take with a spouse or children, or when you are on vacation. Nor does it include taxes that are refundable to the business such as HST or GST.

Meal Expenses:

Entertainment Expenses

How Can I Claim Meals and Entertainment Expenses?
Meal and entertainment expenses are claimed when calculating your business profit. For accounting purposes, they are 100% deductible, but for tax purposes, typically, the maximum amount that you can claim for meal and entertainment expenses is 50% of the actual expense you incur. This is a good rule of thumb to follow, as it will help you avoid claiming too much or too little.
You should keep all receipts in a safe place. If you are audited by CRA, having proof of the amount you claimed will help you avoid unnecessary issues.

Also as stated earlier, there are exceptions to the 50% deduction rule. To find out more about the various exceptions that may be available to you, contact your professional accountant.

Claiming meal and entertainment expenses is a great way to reduce your tax liability and keep more money in your business bank account. This extra money can be reinvested into your company to encourage further growth or used to help improve the lives of your employees and their families.
When Can I Claim Meals and Entertainment Expenses?
Understanding the timing for claiming meals and entertainment expenses is crucial to ensure compliance with CRA regulations. In Canada, expenses must meet specific criteria related to the timing of the expenditure and its relevance to your business.
Here’s a breakdown of key considerations:
By adhering to these timing considerations, you can confidently claim meals and entertainment expenses in a manner that aligns with the CRA’s requirements. Stay vigilant in documenting expenses promptly and accurately, which will enhance your ability to maximize eligible deductions while avoiding potential compliance issues.
Where Can I Claim Meals and Entertainment Expenses?
Whether you are a self-employed individual or a corporation, you can claim meals and entertainment expenses as part of your business operating costs. These are typically recorded on your T1 personal income tax return or in a T2 corporate profit and loss statement for a business. As a general rule, you can deduct up to 50% of the expense as long as it is a reasonable amount in the circumstances.
By strategically claiming meals and entertainment expenses in the appropriate locations, you can optimize your deductions and minimize your tax liability. Remember, adherence to the CRA guidelines and accurate record-keeping are the cornerstones of a successful and compliant expense claim process.

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