Many small business owners learn the 50% rule and stop there. The exceptions, the sales tax adjustment and the paperwork are where claims are won or lost, on a sole proprietor’s T2125 and a corporation’s T2 alike.
Key Takeaways
- Client meals, event tickets and your own meals on business trips are 50% deductible.
- Seven paragraphs of the Act lift the limit to 100%, including up to six staff events a year.
- Long-haul drivers claim 80% of meals on eligible trips, the rate for amounts paid after 2010.
- Registered businesses recover half the GST/HST on meals, or 80% on long-haul drivers’ meals.
- Club dues and golf course fees are refused outright.
How the 50% Limit on Meals and Entertainment Works
Subsection 67.1(1) deems an amount you pay for food or drinks consumed, or entertainment enjoyed, to be 50% of the lesser of what you actually paid and an amount that is reasonable in the circumstances. Read literally, an extravagant bill is cut twice: down to a reasonable figure, then in half. Only that half is deductible for income tax purposes.
The limit reaches past client dinners. The CRA applies it to your own meals when you travel on business or go to a convention, conference or similar event. Its archived bulletin IT-518R adds that expenses related to entertainment, such as taxes, gratuities and cover charges, face the same limit.
When a conference fee including meals does not break out the food, subsection 67.1(3) treats $50 a day as the food and entertainment portion, and the 50% applies to that $50. The fare for a flight, train or bus trip is never split, even when a meal is served on board.
Sole proprietors enter the allowable half on line 8523 of Form T2125. A corporation that expenses the full bill in its financial statements adds the other half back on line 121 of T2 Schedule 1.
Example. Lena’s Ontario consulting corporation is registered for GST/HST, files quarterly and has a December 31 year end. In March she takes two clients to a hockey game and dinner: $600 for tickets, $400 for food and drinks and an $80 tip, or $1,080 before HST. Leaving the HST aside, the deductible share of meal and entertainment expenses is 50%, so the corporation deducts $540 and adds $540 back on Schedule 1. The $130 of HST charged on the $1,000 of tickets, food and drinks follows its own rule, below.
What Counts as a Business Meal or Entertainment Expense
The CRA’s business expenses page lists tickets and entrance fees to an entertainment or sporting event, gratuities, cover charges and room rentals such as hospitality suites. IT-518R adds private boxes at sports facilities, cruises, fashion show admissions and entertaining guests at nightclubs and on vacation trips. The Act says entertainment includes amusement and recreation.
A meal counts only when you incur it to earn business income. IT-518R puts the burden on you to show the amount was incurred for that purpose, and a lunch you would have eaten anyway is hard to tie to earning income. Travel is the recognized case: dinner in Calgary on a sales trip counts, and it is still limited to 50%.
For owner-managers, the risk is the company card. A family dinner paid by your corporation is personal spending that belongs in your shareholder loan account or your income, and ITA 15(1) includes a benefit a corporation confers on a shareholder in the shareholder’s income. The limit follows spending into any company in your group, including a holding company, which needs a business purpose of its own.
When Meals and Entertainment Are 100% Deductible
Subsection 67.1(2) switches the limit off in these situations:
- Your business sells them. A restaurant, hotel or caterer is in the business of providing meals or entertainment for compensation, so it can deduct the cost of what it serves.
- Charity fundraisers. The amount relates to an event intended primarily to benefit a registered charity.
- You bill the client. You are compensated for the cost, and the compensation is reasonable and specifically identified in writing to the person paying it.
- Taxable benefits. The amount must be included in an employee’s income under section 6, as when meals are provided to employees as a taxable perk.
- Remote work sites. Food, beverages and entertainment for employees working at a site outside any population centre of 40,000 or more and at least 30 kilometres from the nearest one, unless the amount is payable for a conference, convention, seminar or similar event.
- Construction camps. Food and drink, but not entertainment, at a work camp built at or near the site where the employee is lodged, which covers providing meals and accommodation to employees working at a construction site.
- Up to six staff events. One of six or fewer special events in a calendar year, such as an office party, where the food, drinks or entertainment is generally available to all individuals employed at a particular place of business.
Example. A corporation with 25 employees at one office holds a holiday party at $180 a head including HST, $4,500 in total. It is the second event of the year and everyone at that office is invited, so the corporation deducts the full $4,500 under paragraph 67.1(2)(f). Its employees face a separate test from a separate source: the agency’s policy treats a social event as non-taxable only when it is open to all employees, costs $150 or less per person including taxes, and stays within six events a year. At $180 a head, the whole $180 is a taxable benefit for each employee. A $150 menu, $3,750 in total, keeps the full write-off and keeps the party off every T4 slip.
Truck Drivers, Foot and Bicycle Couriers and Rickshaw Drivers
Subsection 67.1(1.1) raises the rate for food and beverage expenses of long-haul drivers during an eligible travel period. It started at 60% for amounts paid after March 18, 2007, and has been 80% for amounts paid after 2010.
The definitions in subsection 67.1(5) are narrow. The rate is for an individual whose principal business or principal duty of employment is driving a long-haul truck that transports goods: a truck or tractor designed for hauling freight, with a gross vehicle weight rating over 11,788 kg. A trip qualifies when the driver is away from the municipality or metropolitan area of their base for at least 24 continuous hours, hauling to or from a point at least 160 kilometres from the employer’s establishment, or from home for a self-employed driver.
Self-employed drivers claim these meals on line 8523 of Form T2125. Employed drivers claim expenses on Form TL2, Claim for Meals and Lodging Expenses, and the employer completes Part 3. For 2025, Guide T4044 accepts a simplified rate of $23 per meal, sales tax included, for up to three meals consumed each day.
Example. A self-employed driver spends $5,000 on meals during eligible trips in 2026. At 80%, the meal deduction is $4,000. At the ordinary 50%, it would be $2,500.
Couriers get a different break. If you are a self-employed courier on foot or by bicycle, or a rickshaw driver, the nature of your work lets you claim the extra food and beverages you must consume in a normal eight-hour working day. The agency’s line 8523 page, updated August 31, 2026, sets the daily flat rate at $23, backed by logbooks of days and hours worked and by dispatch slips. Claiming more takes receipts and a document showing the extra amount.
GST and HST Credits on Meal Expenses
Section 236 of the Excise Tax Act mirrors the 50% limit. If you are registered, you recover only half of the GST or HST paid on these costs, and the agency allows two ways to get there: claim 50% of the tax as an input tax credit (ITC) in each reporting period, or claim 100% during the fiscal year and add the excess back afterwards.
Monthly and quarterly filers add it back in their first reporting period of the following fiscal year, and annual filers in the return for that fiscal year. It goes in the line 105 calculation when you file electronically, or on line 104 of a paper return.
Example, continued. Lena’s corporation can claim $65 of the $130 HST in its March quarter and be done. If it claims all $130 instead, it adds $65 back in its January to March return the following year.
Three situations differ. The addition for long-haul drivers’ meals is 20%, not 50%. Charities and public institutions are outside the rule. Businesses on the Quick Method cannot claim ITCs on operating expenses at all, so there is nothing to add back. If you reimburse employees for the cost of meals, the credit on that reimbursement is also 50%.
Non-Deductible Expenses: Club Dues, Golf and Personal Meals
Some costs are refused, not halved. Paragraph 18(1)(l) denies any outlay for the use or maintenance of a yacht, a camp, a lodge or a golf course or facility, unless that is the ordinary course of your business. It also denies membership fees or dues in any club whose main purpose is to provide dining, recreational or sporting facilities, however much business use the membership gets.
Green fees for a client round are therefore a zero, and so are dues at a golf, dining or fitness club. On T2 Schedule 1, club dues have their own add-back line, 120.
Food is treated differently. In a 1998 letter, document 9729608, the agency said a golf club’s dining room, banquet halls, beverage rooms and lounges are not a “facility” under this rule, so business meals there are allowed at 50% when the bill is clearly itemized. Ask the club to itemize.
Personal meals are the other outright denial. Paragraph 18(1)(h) refuses personal or living expenses, other than travel expenses incurred while away from home in the course of carrying on your business.
The Records the Canada Revenue Agency Expects to See
The agency’s business records page, updated August 31, 2026, says a receipt should show the date, the seller’s name and address, the buyer’s name and address, and a description of what you bought. A credit card statement alone is not enough, and you generally keep records for six years from the end of the last tax year they relate to.
Claiming the ITC adds requirements based on the total paid, with thresholds that rose to $100 and $500 on April 20, 2021:
- Under $100: the supplier’s name, the date and the total paid.
- $100 to $499.99: add the supplier’s GST/HST registration number and the tax charged, or a statement that the price includes it.
- $500 or more: add your name, a brief description of what was supplied and the payment terms.
For entertainment, IT-518R asks for the names and business addresses of the people entertained, with the places, dates, times and amounts spent on the meal or event. The bulletin is archived, but the agency’s business expenses page still cites it.
In our audit representation work, meal claims are rarely lost because a dinner did not happen. They are lost because nobody recorded who was there or why, and an owner-manager who cannot show a business purpose risks more than the lost claim, since personal spending by the company can become a shareholder benefit. Write the names and the reason on the receipt at the table. If a questionnaire has already arrived, start with our guide to CRA audit questionnaires.
Frequently Asked Questions
What meals and entertainment expenses are 100% deductible?
The full cost can be claimed when a paragraph of subsection 67.1(2) applies. The main cases are food you sell, costs rebilled to a client and identified in writing, taxable employee benefits, remote work sites, construction camps, charity fundraisers, and up to six events a year open to all employees at one location.
What can I claim for meals and entertainment?
You can deduct 50% of the expenses you incur for food, drinks and entertainment to earn income, or of a reasonable amount if that is lower. That covers client meals, event tickets, cover charges, tips and your own meals on business trips. Club dues, golf course fees and personal meals are refused.
Can I deduct meals at my business?
Yes, when they serve the business. Food for a client meeting at your office is normally limited to 50%. It rises to 100% for one of six or fewer special events a year that everyone employed at that location can attend.
Do I have to add back GST/HST on meals?
Only if you claimed 100% of the tax during the year. You then add 50% back in your first reporting period of the next fiscal year, or in that year’s return if you file annually. For long-haul drivers’ meals the addition is 20%.
Are golf green fees a deductible business expense?
No. Paragraph 18(1)(l) denies the cost of using a golf course unless golf is the ordinary course of your business, and it denies dues in clubs whose main purpose is dining, recreation or sport. Itemized meals in the clubhouse can still be claimed at 50%.
Can my company write off the staff holiday party in full?
Yes, if it is one of no more than six special events in the calendar year and everyone employed at that location is invited. Keep it at $150 a head or less, taxes included, and the agency also treats it as non-taxable for your employees.
The Bottom Line
The 50% rule is the easy part. The exceptions, the credit adjustment and the paperwork decide what you keep.
- Assume 50% of the reasonable cost, tips included, unless a paragraph of 67.1(2) applies.
- Keep a list of staff events and who was invited, and stop at six a year.
- Book the GST/HST add-back in the first return after year end, at 20% for long-haul drivers’ meals.
- Keep meal and entertainment costs on their own ledger line, apart from club dues and green fees.
Which of these rules drives your numbers depends on how your business entertains, travels and pays its people, so treat this as general information rather than a ruling on your file. Our corporate tax team reviews expense policies alongside your corporation’s tax return, and you can get in touch before your next year end.
