Meals & Entertainment (50% Rule) — Canada Tax Rules

Claim 50% of business meals, client entertainment, and restaurant costs when you can demonstrate a clear business purpose.

Claimable: Partially claimable · Tax authority: CRA (Canada Revenue Agency)

CRA (Canada Revenue Agency) Rules

• CRA allows a deduction of 50% of the cost of meals and entertainment incurred to earn business income.
• A business meal must have a genuine business purpose — meeting a client, discussing a project, or entertaining a prospect.
• Keep the receipt and note: date, restaurant/venue, amount, who attended, and the business reason.
• The 50% limit applies regardless of whether you pay by cash, credit card, or company account.
• Office parties and social events for all employees (including yourself if you have staff) may qualify at 100% for up to 6 events per year — but as a sole proprietor, the 50% rule still typically applies.
• Meals while travelling away from home for business are also 50% deductible — keep all receipts.
• Meals provided on your business premises to employees during working hours may be fully deductible under specific conditions — seek advice if applicable.

Limits

50% of actual cost is deductible. There is no separate annual cap, but claims must reflect genuine business-purpose meals. Excessive or unreasonable restaurant bills may be challenged by CRA.

Worked Example

Raj meets a client for lunch and spends C$90 including tip and tax. He takes a prospect to dinner for C$150. Both meals have documented business purposes. Total receipts: C$240. Deductible at 50%: C$120 claimed on T2125 under meals and entertainment.

Record Keeping

• Keep all restaurant and venue receipts — not just credit card statements
• Write on each receipt: date, names of people present, and the specific business reason (e.g. 'client meeting — Q2 project discussion')
• Record the business outcome or topic discussed — this strengthens your position in a CRA review
• Keep receipts for meals while travelling for business — note the destination and trip purpose
• Maintain a summary log of all meal receipts throughout the year to make T2125 preparation easier

Frequently Asked Questions

Can I deduct 100% of a business meal in Canada?

No — CRA's rules limit the deduction to 50% of business meals and entertainment costs in virtually all circumstances for self-employed individuals. Even if the meal was purely for business, only 50% is deductible. The only exceptions apply in very specific situations (e.g. meals provided to all employees at work), which generally don't apply to sole proprietors.

What records does CRA require for a business meal deduction?

CRA requires: a receipt from the restaurant or venue (showing itemised costs), a written note of who attended (names), the business purpose of the meeting, and the date. A credit card statement alone is not sufficient — you need the original itemised receipt plus business purpose documentation.

Are client entertainment tickets (hockey, concerts) 50% deductible?

Yes — tickets to sports games, concerts, or other entertainment events purchased for business client entertainment are 50% deductible under the meals and entertainment rules. Keep the ticket receipts and note the client name and business relationship.

Are meals during a conference 50% or 100% deductible?

Meals during business travel and conferences are 50% deductible. The 50% limit applies even when meals are consumed while attending a professional conference or training event away from home.