Food, beverages, and entertainment you pay for to earn business income are deductible, but only in part. On Form T2125, they go on line 8523, Meals and entertainment — and the form asks for the allowable part, not the amount on the bill.
What belongs here
- meals and beverages with clients, or while you are out on business
- entertainment: tickets and entrance fees to an entertainment or sporting event, gratuities, cover charges, and room rentals such as hospitality suites
- meals while you travel or go to a convention, conference, or similar event, although special rules can affect the claim
What does not belong here
A personal meal with no business purpose. It isn't a business expense, so it doesn't go on the form at all.
The full amount you paid. The receipt shows what you spent; the form shows the allowable part. Capture the whole amount, then claim the part the limit allows.
A meal you have already recorded as a travel expense. Meals on a business trip are recorded with your travel costs on line 9200, travel expenses, and the same limit still applies to them. Count each meal once, in one place.
How much of the bill you can claim
The maximum you can claim for food, beverage, and entertainment expenses is half of the lesser of two amounts: the amount you incurred, and an amount that is reasonable in the circumstances. When you claim expenses on this line, you have to calculate the allowable part for business use.
The limit does not apply in a handful of cases the CRA sets out:
- your business regularly provides food, beverages, or entertainment to customers for compensation — a restaurant, hotel, or motel
- you bill your client or customer for the costs and show them on the bill
- you include the amount in an employee's income, or would include it if the employee did not work at a remote or special work location — the CRA's page adds conditions here about the kind of event and how far the location is from the nearest urban centre
- an office party or similar event to which you invite all your employees from a particular location, up to six such events a year
- a fund-raising event mainly for the benefit of a registered charity
- meals you provide to an employee housed at a temporary work camp built to house and feed employees at a construction site
Long-haul truck drivers and couriers
Food and beverages a long-haul truck driver consumes during an eligible travel period are deductible at four-fifths. An eligible travel period means at least twenty-four continuous hours away from the municipality and metropolitan area where the driver lives, driving a long-haul truck that carries goods to or from a location beyond a set radius of that residential location. The CRA's page gives the distance.
Self-employed foot and bicycle couriers and rickshaw drivers can deduct the cost of the extra food and beverages they have to consume in a normal working day because of the nature of the work. There is a daily flat rate for this, set out on the CRA's page. If you claim it, be ready to provide logbooks showing the days you worked and the hours worked on each of them; the CRA may also ask for dispatch slips. To claim more than the flat rate, you need supporting receipts for all the food and beverages, plus a document showing how much extra the work requires and how that exceeds what an average person would consume.
What to keep
Keep a record of all your income and expenses, with the documents behind them — sales invoices, receipts, and vouchers. Every expense needs an invoice or receipt showing the seller, the date, and what was bought. On this line the detailed restaurant slip is worth more than the card terminal copy, because it shows what was actually served.
If you are claiming the courier flat rate, keep the logbooks of days and hours worked as well, and any dispatch slips.
Don't send any of it in with your return. Keep it in case the Canada Revenue Agency (CRA) asks to see it. Business records follow the same six-year retention rule as your personal documents.
Official CRA sources
Source: Canada Revenue Agency (canada.ca). Not tax advice.