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Tracking your Meals and Entertainment CRA Corporate may appear to be something only certain types of dieters may do. But did you know that spending on these activities can actually save you tax money?

There is no definite or precise rule to determine the deduction of your meal and entertainment expenses. It is a subjective and grey area that considers the factors like particular business situations. As well as the scenario in which a specific meal and entertainment expense is incurred.  This guide will provide more insight into the puzzling and ambiguous meals and entertainment expenses.

1. Which “Meals & Entertainment Expenditure” can be claimed?

The general principle for an expense incurred in the course of business with the sole purpose of generating business income makes it eligible for a tax deduction. However, the subjectivity in this matter shall be understood comprehensively when we consider all the limitations by tax law. This will help you to determine your legitimate tax deductions on meals and entertainment expenses. Altogether and to figure out unique scenarios where you can claim a 100% deduction.

2. CRA definition of Meals & Entertainment Expenses

The meals category includes expenses incurred in the consumption of food and beverages. CRA’s definition of entertainment expenses includes attendance at an event (e.g. tickets for a concert, entertaining guests at sporting events, etc.). When you incur these expenses in the course of your business, your company may claim 50% of the total amount paid as a deduction on its corporate income tax return. For more information on Food, Beverages and Meals and Entertainment CRA Corporate see the Canada Revenue Agency’s Income Tax Interpretation Bulletin IT-518R.

3. Certain examples of CRA allowable Meals & Entertainment Expenses
  • Meals that are eaten with customers, vendors, employees.
  • Room rentals to provide entertainment, such as a hospitality suite.
  • Other leisure activities like cruises
  • Private boxes at sports facilities.
  • Admission to fashion shows.
  • Tickets for a theatre, concert or athletic event, or other performance.
  • Cost of entertaining guests at clubs (night, athletic, social, and sporting) as well as on vacation and similar trips.
  • Taxes, tips, gratuities, and cover charges are included in entertainment expenses.
4. CRA’s 50% rule – Line 8523 – Meals & Entertainment  

The maximum amount you can claim for food, beverages, and entertainment expenses is 50%of the lesser of the following amounts:

  • The amount you incurred for the expenses.
  • An amount that is reasonable in the circumstances.

You will have to calculate the allowable part you can claim for business use when you claim expenses on this line. These limits also apply to the cost of your meals when you travel or go to a convention, conference, or similar event.

  • Line 9200 – Travel expenses set the 50% limit to the cost of food and beverages served and entertainment enjoyed when you travel on an airplane, train, or bus when the ticket price does not include such amounts.
  • You can deduct the cost of attending up to two conventions a year. The conventions have to meet the following conditions:
  • Relate to your business or your professional activity.
  • Held by a business or professional organization within the geographical area where the organization normally conducts its business

If the convention fees include the cost of food, beverages, or entertainment. But do not show it separately you can deduct this daily $50 amount as a meal and entertainment expense. The 50% limit applies to the daily $50 amount. For example

Convention costs are $400 for 2 days, meals included. Subtracting $50/day for meals makes the adjusted convention fee $400 ($50 x 2) = $300. Claim the $100 meals and it will be subject to the usual 50% limitation and end up as a $50 deduction.

Note: Incidental items such as coffee and doughnuts available at convention meetings or receptions do not count as meals.

5. CRA Guidelines on Tips and Taxes

CRA includes taxes and tips in the cost of food and beverages subject to the standard 50-percent rule. You will not find any separate expense category for tips and taxes. So, for instance, a client relevant to your business had lunch at a restaurant and the bill might look something like this:

Description Amount ($)
Food and beverages  100
Harmonized Sales Tax (Ontario -13%) 13
Tip 10
Total  123
Deductible expense (50% of total) 61.5

In this regard, the amount that can be claimed in your business tax return subject to the 50% rule is $61.5 (50% of total billing amount $123).

What’s not allowed??

According to the CRA, the below-mentioned expenses are not allowable as Meals and Entertainment CRA Corporate expenses, which means you cannot claim them as a tax deduction. 

  • Recreation and club dues (i.e. golf club memberships).
  • Season tickets for sporting events (unless satisfactory proof is provided that the tickets are a promotional expense).
  • Meals claimed while outside a sales territory or on vacation.

These guidelines are set CRA to restrict businesses to include all sorts of meals and entertainment expenses that the business incurs and exploit the deduction allowed. 

6. When can 100% of Meals & Entertainment Expenses be claimed?

There are scenarios when you can claim entire meals & entertainment expenses.

  1. You charge your client or customer for the meal and entertainment costs and show these costs on the bill.
  2. You include the amount of the meal and entertainment expenses in an employee’s income or would include them if the employee did not work at a remote or 

special workstation.

  1. You incur meal and entertainment expenses for a Christmas party or similar event, and you invite all your employees from a particular location. Note that the event doesn’t have to be organized at your registered business address; if you host an event for all employees at a restaurant, rented hall, or other location, you can still deduct 100% of your food and entertainment expenses.  (You can only hold six events like this a year though!)
  2. You incur meal and entertainment expenses for a fund-raising event that was mainly for the benefit of a registered charity. The sole purpose of the event must be to raise funds. Not even a part of the event can be devoted to the regular activities of the registered charity to accomplish its objectives. 
  3. If you travel by bus, train or by airplane and the meals and entertainment expenses were included in the travel fee. If you travel via boat, ferry, or ship the cost of meals and entertainment expenses will be subject to a 50% rule.
7. Exceptions to the 50% Rule 

Some exceptions to the 50% rule for meals and entertainment expenses are based on the kind of work people do and/or the type of businesses they run. According to the Canada Revenue Agency, the following expenses are exempt from the 50% limitation, which means you can write off the full amount of the expense.

  1. Businesses such as restaurants, hotels, and airlines can claim the entire cost of expenses incurred by providing meals & entertainment to paying customers.
  2. Long-haul truckers can claim 80% of the food and beverages they consume during eligible travel periods. Travel period is eligible when
  • a truck driver drives continuously for at least 24 hours away from home.
  • when he is delivering goods to a distance of at least 160 kilometers.
  1. Self-employed foot and bicycle couriers and rickshaw drivers can claim total expense spend on extra food and beverages they need to consume in their normal working hours (eight hours) (or, for 2006 and later tax years, a daily flat rate of $17.50).
  2. If your employee(s) work at a remote location, where an employee “could not reasonably be expected to establish and maintain a self-contained domestic establishment” and you provide food and beverages, you can claim 100% of the costs.

Note that the Canada Revenue Agency demands proof that these expenses are incurred to earn business income. Hence it is compulsory to have proper documentation when claiming such expenses.

8. Who can claim Meals and entertainment expenses?

While the above information deals with food and entertainment expenses as they apply to business people and professionals. The 50-percent limit also applies to the Meals and Entertainment CRA Corporate expenses of employees. Such as the expenses of commissioned salespersons and the traveling expenses of employees ordinarily required to work away from their employer’s place of business.

9. How to claim Meals and Entertainment Expenses?

If you are operating your business as a sole proprietorship or partnership. Claiming your business expenses is part of completing Form T2125, Statement of Business or Professional Income as part of your T1 income tax return.

If you are operating your business as a corporation, you will claim meals and entertainment expenses under operating expenses (8523). While you are using the General Index of Financial Information (GIFI) to complete your financial information statement on your T2 corporate income tax return.

If you are looking for a professional Tax Accountant who can lead you through the process of claiming business expenses on your tax return. In addition feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.

Disclaimer:

The information on this page is intended to provide general information. The information does not consider your personal situation. As well is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.

Salman Rundhawa
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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