Meals and entertainment can be a great deduction for many businesses. But what is considered a valid meals and entertainment expense? And to what extent can you claim this deduction? See below!
Generally, the meals and entertainment expense are food, beverage and entertainment expenses incurred by the business. To qualify, these outings must be with a customer, vendor or employee; or travelling for business. These outings should be well documented, with details of who you were with and what business was conducted.
Some examples of possible allowable meals and entertainment expenses:
- Meals eaten with customers, vendors and/or employees
- Tickets for events (theatre, concerts, athletic etc.)
- Private boxes at sports facilities
- Room rentals for entertainment (hospitality suites etc.)
- Cruises
- Entertaining guests at clubs
However, the rule is to claim 50% of these costs or 50% of what is reasonable in the circumstances. This also applies to the GST/HST associated. Taxes and gratuities are included in expenses.
Disallowed meals and entertainment expenses are recreation and club dues (ie golf club memberships), season tickets for sporting events and meals claimed while outside sales territory or on vacation.
There are exceptions to the 50% claim rules, the following are examples of meals and entertainment that could be claimed at the full amount and full GST/HST:
- Your business sells food, beverages and entertainment to customers for compensation
- You bill your client or customer for the meal and entertainment costs
- The expense for an office party or event where all employees (Limit of six of these events a year)
- You incur meals and entertainment expenses for a fund-raising event of a registered charity
Other exceptions:
- Long-haul truck drivers can claim 80% of food and beverages consumed while travelling
- Self-employed foot and bicycle couriers can claim 100% of extra food and beverages consumed in an 8-hour workday cause of the nature of their work. The daily flat rate that can be claimed is $17.50.
The most important part of meals and entertainment expenses, no matter the circumstances and extent of deduction, is to keep detailed and valid records of what the expenses were for because CRA may request them in an audit.
Visit us a Jibe for help with navigating your meals and entertainment expenses and filing your T2 Corporate Return or Self-Employed T1 Personal Return.