How to Get Your Meals and Entertainment Expenses Reimbursed
According to the CRA, meal expenses cover the price of both food and beverage. The cost of admission to a performance or athletic event; tips; and the cost of renting out spaces for entertainment (such private boxes at sporting venues or hospitality suites in hotels) are all examples of entertainment expenses.
CRA rules on meals and entertainment expenses
According to the Canada Revenue Agency, the maximum you can deduct for food, beverage, and entertainment expenses is 50% percent of the lesser of the following amounts:
- The amount you paid for the costs, or
- A sum that, given the circumstances, is fair.
The 50% rule also holds true when the price of entertainment and meals:
- May be claimed as a tax deduction
- Is a sum that includes all other capitalised expenses. Including depreciable assets or the overall cost of a property, for instance
- Is the amount made up of additional costs, such as those related to inventories, scientific research, or other costs associated with the development of businesses.
The 50% cap also applies to employee costs for food and entertainment, such as commission-based salesperson costs and travel costs for employees who frequently travel away from their employer's place of business.
Are you using your personal vehicle to travel for work-related purposes? Using a mileage tracker app will save you time by automatically tracking your business kilometres and ensure you have proof of your travel.
Meal expenses are among the most frequent expenses made on travels taken for work. Meal allowance is the term used to describe the reimbursement you receive from your company for the precise costs you expended. It differs slightly from per diem allowance, which is a predetermined sum of money that can be used for travel-related expenses like hotel and meals.
Are meals and entertainment expenses deductible?
You can only deduct 50% of any meals and entertainment expenses from your business income. The same holds true for meals and entertainment expenses related to a convention. You can only deduct 50% of the cost of meals and/or entertainment if your convention costs also these expenses. The cost of attending conventions must be subtracted from your business income. Hence, employees cannot deduct their convention-related expenses.
The following costs are not subject to the 50% restriction, therefore you can deduct both the whole cost and HST, according to the Canada Revenue Agency:
- You provide clients with food, drinks, or entertainment in exchange for money (for example, a restaurant, hotel, or motel)
- The cost is associated with an office party or other similar function to which all of your employees from a specific location are being invited. Six of these occasions are allowed a year. (You might buy the entire team lunch for a staff meeting or Christmas celebration, for instance.)
- You incur costs associated with a fundraising activity that primarily benefited a registered charity.
- Long-haul truckers are permitted to deduct 80%.
Reimbursement for meal and entertainment expenses
An accountable plan must be in place for an employer to reimburse employees for their expenses. Under an accountable plan, employees must keep track of their spending and refund whatever they cannot justify.
Any reimbursements, including those that are normal and necessary, are taxable income if the company does not have an accountable plan.
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