Taxpayers and their accountants must make sure that proper records are kept to deduct expenses incurred for meals and entertainment. The Canada Revenue Agency (CRA) requires business men and women to maintain records of all expenses that will be claimed as deductions.Records must include the names and business addresses of person or clients being entertained, name and location of restaurant or entertainment facility, date, time, and business reason, and cost of the meal or entertainment. Records documenting expenses include credit card receipts or other reason documentation.
Expenses that are generally allowable for deduction are expenses that are incurred to earn business or property income however there are limitations. Typically the allowable deductible amount is 50% of the lesser of the actual cost or a reasonable amount for the setting. Additionally, the allowable deductible amount is the same for the cost of meals for work required travel, conferences, events, and conventions.
Special rules can affect the amount of allowable meal deductions. If any of the following circumstances apply deduction limits do not apply:
- Cost for meals and entertainment that are included as part of an employee’s income or would be if the employee did not work at special or remote work location and the expenses are not for an event such as a seminar, convention, or conference.
- Employers who provide a party or event for all employees from a particular location may deduct 100% of the expense for meals and entertainment even if clients are also invites. (There is a limit of 6 such events per calendar year).
- Expenses for meals for employees who are live in temporary work housing working at a remote site where the employee is not able to return home daily.
- Expenses incurred for meals and entertainment supplied for an event to raise funds for registered charities are deductible.
- Meal and entertainment expenses that are itemized on an invoice and billed to a customer are deductible.
- Owners of businesses that provide meals or entertainment may deduct the expenses for meals and entertainment that are provided as compensations to customers.
Expenses for entertainment include tickets or admittance fees for an sport or entertainment event, rental cost for hospitality suites, and gratuity and cover charges.
Long Haul Drivers
Long haul truck drivers may deduct 80% of the expenses for food and beverages during eligible travel time.
Eligible travel time is when the driver is away from home for at least 24 hours and is driving a a long haul truck to transport cargo to or from a location that is farther than at least a 160 kilometer radius from the driver’s location of employment.
Definition of a long haul driver is a person whose employment or principal business if driving a long haul truck to transfer freight from one location to another.
A long haul truck is defined as tractor or truck with a gross vehicle weight (GVW) of more than 11,788 kilograms that is designed to transport cargo.
Self Employed Couriers
For 2006 and later self employed couriers are able to claim a flat rate of $17.50 daily without keeping receipts for the cost of food and beverages consumed in a normal working day (8 hours). However couriers must be able to show log books that show the days and hours worked for each of the days cost of meals is claimed.
Taxpayers must keep documented records of meal and entertainment expenses, unless otherwise specified by the CRA. Following these tips will help reduce your risk of being audited by the CRA for claiming deductions for meal and entertainment expenses.