Guide
How much of a restaurant receipt can a Canadian business deduct?
The CRA's 50% limit on business meals and entertainment, the exceptions to it, how it affects GST/HST input tax credits, and what to write on the receipt.
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A Canadian business can generally deduct only 50% of what it spends on food, drinks and entertainment, whether it is a client lunch, a coffee meeting or event tickets. Self-employed individuals report the deductible half on line 8523 of Form T2125. The same 50% limit applies to the GST/HST input tax credit on those purchases. Exceptions include up to six staff events a year open to all employees at a location, and 80% for eligible long-haul truck drivers.
- General limit
- 50% of meals and entertainment
- T2125 line
- 8523, allowable part only
- GST/HST input tax credit
- Also limited to 50%
- All-staff events
- Up to six a year, fully deductible
- Long-haul truck drivers
- 80% during eligible travel
- Tips and taxes
- Part of the meal, so also 50%
What is the 50% rule for business meals?
The Income Tax Act caps the deduction for food, beverages and entertainment at 50% of the amount spent. It applies to meals with clients, meals with suppliers, meals while travelling on business, and entertainment such as tickets to a game or a show. The reasoning is that a meal has a personal element even when it is eaten for business, so half of it is treated as personal.
The limit applies to the whole bill that relates to the meal: the food, the drinks, the tip and the sales tax on them. It does not apply to things that are not food, beverages or entertainment, so a taxi to the restaurant or parking at the venue is deductible in the ordinary way.
| Item | Amount | Claimable |
|---|---|---|
| Food and drinks before tax | CA$100.00 | CA$50.00 as an expense on line 8523 |
| HST at 13% | CA$13.00 | CA$6.50 as an input tax credit, if registered |
| Tip | CA$15.00 | CA$7.50 as an expense on line 8523 |
When can I deduct more than 50% of a meal?
- Staff events. Food, drinks and entertainment at up to six special events a year — a holiday party, for example — are fully deductible when every employee at a particular location is invited.
- Long-haul truck drivers. Meals eaten during an eligible travel period of at least 24 continuous hours away from home are deductible at 80%.
- Billed to a client. Meal costs you charge to a client and show on the invoice are deductible in full by you; the limit applies to the client instead.
- Selling food is the business. A restaurant's cost of the food it sells is not limited.
- Charity fundraisers. The meal portion of a ticket to a fundraising event for a registered charity is excluded from the limit.
The exceptions are narrow and each has conditions. A lunch with one employee is not a staff event, and a sole proprietor with no employees has no all-staff events to hold. When in doubt, claim 50%.
Does the 50% limit apply to the GST/HST on a meal?
Yes. A GST/HST registrant can claim an input tax credit for only 50% of the tax paid on meals and entertainment. You can claim the full amount through the year and correct it with a single adjustment at the end of the fiscal year, or claim half as you go. Either way, the tax on a restaurant bill has to be captured as its own number, because a total cannot be halved correctly after the fact if you do not know how much of it was tax.
What should I write on a restaurant receipt?
The receipt proves what was spent. It does not prove why. For meals and entertainment the business purpose is the part a reviewer asks about, and it is the part nobody remembers a year later. Note it on the day.
- Keep the itemised receipt, not only the card slip. The card slip has a total and no tax breakdown.
- Write who you met and which business they are with.
- Write the purpose in a few words: "proposal review for spring contract" beats "client lunch".
- Record the tip separately if it was added on the card slip.
SimpleLoonie reads the restaurant receipt, records the subtotal, each tax and the total as separate amounts, and files it under a meals category. You can add the business purpose as a note on the transaction, and custom AI prompts on the Business plan can pull extra detail from the receipt itself. The 50% adjustment is a calculation you or your accountant make on the category total at year end; SimpleLoonie does not decide what is deductible.
Frequently asked questions
Can I deduct 100% of a business meal in Canada?
Usually not. The general rule limits the deduction for food, beverages and entertainment to 50%. Full deduction is only available in specific cases, such as up to six special events a year open to all employees at a location, or meals billed to and itemised for a client.
Are tips on business meals 50% deductible too?
Yes. The tip is part of the cost of the meal, so it is subject to the same 50% limit as the food and drinks. Record it as part of the meal, and keep the card slip if the tip was added there rather than on the itemised receipt.
Is a coffee with a client subject to the 50% rule?
Yes. The rule covers food and beverages of any size consumed for business, from a coffee to a dinner. The amounts are small, but they add up over a year and are treated the same way as a restaurant bill on line 8523.
Can I deduct my own lunch on a normal working day?
Generally not. Your own meals during an ordinary working day are personal living expenses. Meals while travelling away from your usual place of business, and meals with clients for a business purpose, are the cases that can be deducted at 50%.
How do I claim the GST/HST on business meals?
A GST/HST registrant can claim an input tax credit for 50% of the tax paid on meals and entertainment. You can claim it all during the year and make one adjustment at year end, or claim half as you go, provided the tax amount on each receipt is recorded.
Sources
- Canada Revenue Agency — Line 8523, Meals and entertainment
- Canada Revenue Agency — Claim input tax credits
- Canada Revenue Agency — Guide T4002, Chapter 3: Expenses
This page is general information about Canadian tax administration, not tax advice, and it was last reviewed on . Rules and rates change. For a decision that matters to your business, check the source above or talk to an accountant.