Meals and Entertainment Expenses in Canada: What Business Owners Can Deduct

For Canadian business owners, understanding how meals and entertainment expenses are treated for tax purposes can make a meaningful difference to your tax bill. Every year, many businesses either overclaim or underclaim these expenses — leading to CRA issues or missed tax savings.

The Canada Revenue Agency (CRA) has specific rules on when meals and entertainment are 100% deductible, 50% deductible, or not deductible at all. Knowing these rules helps you stay compliant while maximizing deductions.

Below is a clear, practical breakdown every business owner should understand.

CRA Rules for Meals and Entertainment Expenses

In most cases, the CRA limits meals and entertainment deductions to 50% of the actual cost. However, there are important exceptions where 100% of the expense may be deductible.

Let’s look at common real-life examples.

Example 1: Meals as Part of Your Business Operations (100% Deductible)

If your business earns income by providing meals or entertainment, the costs are generally 100% deductible.

Common examples include:

• Restaurants

• Catering businesses

• Hotels and event venues

• Food trucks

If you purchase food and beverages specifically to serve paying customers, these costs are considered direct business expenses, not entertainment — and are fully deductible.

Example 2: Client Meals and Business Entertainment (50% Deductible)

If you take a client out for lunch, dinner, drinks, or entertainment to discuss business, the CRA limits your deduction to 50% of the total cost.

This applies even if:

• The meeting is strictly business-related

• You discuss contracts or negotiations

• The expense feels essential to your business

The 50% rule covers most client meals, drinks, and entertainment expenses unless a specific exception applies.

Common CRA Questions About Meals and Entertainment

Can I deduct 100% of staff parties or employee events?

Yes — with conditions.
You may deduct 100% of the cost if:

• The event is open to all employees at a particular location, and

• You hold six or fewer events per year

Examples include holiday parties, summer barbecues, or annual staff appreciation events.

Are meals while traveling for business deductible?

Generally, only 50% of travel meals are deductible, even when traveling for work.
The full deduction only applies if:

• You are in the business of providing meals, or

• A specific CRA exception applies

Proper documentation is essential to support these claims.

Are personal meals or club membership fees deductible?

No.
The CRA does not allow deductions for:

• Personal meals

• Social or recreational club dues

• Golf club, dining club, or fitness memberships

Even if business discussions happen at these venues, the fees remain non-deductible.

Why Proper Bookkeeping Matters for Meal Deductions

Incorrectly classifying meals and entertainment is one of the most common bookkeeping errors seen by accountants. Mixing personal and business expenses or applying the wrong deduction percentage can trigger CRA reviews and penalties.

Working with a professional bookkeeping and accounting firm like Ali Asghar CPA ensures:

• Expenses are categorized correctly

• CRA limits are applied properly

• HST is claimed accurately

• Your books are audit-ready year-round

Final Thoughts: Maximize Deductions, Stay CRA-Compliant

Meals and entertainment expenses can add up quickly. Knowing when you can deduct 50%, 100%, or nothing at all helps you avoid surprises at tax time and keeps your business compliant.

If you’re unsure how to treat these expenses — or want peace of mind that your books are handled correctly — Ali Asghar CPA provides professional bookkeeping and tax support for Canadian businesses, helping you claim what you’re entitled to without CRA risk.