# Meals and entertainment expenses in Canada: the 50% rule Can you deduct business meals in Canada? Usually half. How the CRA's 50% rule works, the exceptions, and why you only claim half the GST/HST back too. Published: 2026-10-04 · Spark --- Yes, you can deduct business meals in Canada — but usually only half of them. The CRA caps the deduction for food, drinks and entertainment at 50%, and the same 50% applies to the GST/HST you claim back. Most of the mistakes people make with meals come from applying one half and forgetting the other. ## The 50% rule The CRA says the most you can claim for food, beverages and entertainment is **50% of the lesser of** what you actually spent and an amount that is reasonable in the circumstances ([CRA, line 8523](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/completing-form-t2125/line-8523-meals-entertainment-allowable-part-only.html)). Two things follow from that wording: - **It has to be a business expense first.** Lunch with a client to talk about a job qualifies. Your own lunch on an ordinary workday at your usual place of business is a personal expense, and 50% of a personal expense is still zero. - **"Reasonable" is a ceiling.** A $900 bottle of wine at a client dinner is not made deductible by the client being there. The limit also applies to your own meals when you travel for business or go to a conference, convention or similar event (same CRA page). ### What counts as entertainment The CRA lists tickets and entrance fees to entertainment or sporting events, gratuities, cover charges, and room rentals such as hospitality suites ([CRA, line 8523](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/completing-form-t2125/line-8523-meals-entertainment-allowable-part-only.html)). Note that tips are inside the 50% limit — they are part of the meal, not a separate full deduction. ## The GST/HST half: claim 50% of the tax back If you are registered for GST/HST, you normally claim back the tax you pay on business purchases as input tax credits (ITCs). On meals and entertainment, most businesses can only claim **50%** of that tax ([CRA, ITC eligibility percentage](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/calculate-prepare-report/input-tax-credit/calculate-eligibility-percentage.html)). Charities and public institutions can claim 100%, and long-haul truck drivers 80%. The CRA gives you two ways to get there ([CRA, methods to calculate ITCs](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/calculate-prepare-report/input-tax-credit/calculate-methods.html)): 1. **Claim 50% as you go.** Claim half the GST/HST on each meal in the period you pay it. Nothing to fix at year end. 2. **Claim 100% during the year, then pay half back.** Monthly and quarterly filers add the 50% adjustment to the first return of the following fiscal year; annual filers add it on that year's return. Method 1 is simpler and is the one most bookkeepers use, because the books are right every period rather than wrong until the adjustment. ## Worked example A client lunch in Ontario: $100 of food plus $13 of HST (13%, per the [CRA's rates page](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-which-rate/calculator.html)), paid on the business card. Total $113. - **ITC claimed:** 50% × $13 = **$6.50** - **Cost on the books:** the CRA says the expense you deduct includes the GST/HST you paid, minus any ITC you claimed ([CRA, expenses section of T2125](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/completing-form-t2125/expenses-section-form-t2125.html)). So $113 − $6.50 = **$106.50** - **Deductible for income tax:** 50% × $106.50 = **$53.25** Book it as $106.50 to a meals and entertainment account and $6.50 to GST/HST receivable. Your accountant (or the tax software) applies the 50% income-tax limit to the account total at year end. The mistake to avoid is claiming the full $13 as an ITC *and* deducting half of the $113 — that takes the tax twice. If you are not registered for GST/HST, there is no ITC: the whole $113 is the cost, and $56.50 is deductible. ## The exceptions: when it is not 50% The CRA lists six situations where the 50% limit does not apply ([CRA, line 8523](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/completing-form-t2125/line-8523-meals-entertainment-allowable-part-only.html)): - **You sell food or entertainment.** A restaurant, hotel or motel that regularly provides food, drinks or entertainment to customers for payment. - **You bill the client for it** and show the cost on the bill. The meal is then a cost you recover, not entertainment you absorb. - **Remote or special work locations**, where the meals are (or would be) included in an employee's income — with conditions, including that the location is at least 30 km from the nearest urban centre with a population of 40,000 or more. - **Staff parties**, where you invite all employees from a particular location. This is limited to **six such events a year**. - **Charity fundraisers**, where the event was mainly for the benefit of a registered charity. - **Temporary work camps** built to provide meals and accommodation to employees working at a construction site. Long-haul truck drivers get their own rule: 80% for food and drinks consumed during eligible trips (same page). The staff-party exception is the one small businesses use most. A holiday dinner for the whole team is fully deductible; taking two favourite employees out for drinks is a 50% meal. ## Meals that are not deductible at all - **Your own everyday lunches.** Eating is personal unless you are travelling or entertaining for business. - **Meals with friends or family** where business is an excuse rather than the purpose. - **The part of any bill that is more than reasonable** in the circumstances. The 50% applies to the lesser amount. When personal meals land on the business card — and they will — they are not an expense at any percentage. They belong in the [shareholder loan or owner's draw](/guides/business-vs-personal-expenses), not in meals and entertainment. ## Keep the receipt, and write on it The CRA can ask you to show a meal was for business. A card statement shows you spent $113 at a restaurant; it does not show who was there or why. Keep the itemized receipt and note: - Who you were with (name and company) - What business it was for - Whether it was a staff event for everyone at a location Thirty seconds at the table saves an argument later. For how long to keep it all, see [how long to keep business records](/guides/how-long-to-keep-business-records-canada). ## Set up your books so the split happens automatically The easiest way to get meals right is to give them their own account in your [chart of accounts](/guides/chart-of-accounts-for-small-business-canada) — never lump them into "office" or "travel" — and to book the GST/HST at half as each one comes in. [Spark Books](/books) does this by default: when a transaction is sorted to meals and entertainment, it claims half the GST/HST and books the rest to the expense, so your [GST/HST return](/guides/how-to-file-a-gst-hst-return) figures are already right. If it can't tell whether a restaurant charge was a client lunch or a personal one, it asks, and remembers your answer for next time. ## The short version - Business meals and entertainment: deduct **50%** of the reasonable cost. - GST/HST on them: claim **50%** as an ITC. - The expense on your books is the total minus the ITC; the 50% income-tax limit applies to that. - Six exceptions, of which staff parties (up to six a year) and billed-back meals are the common ones. - Your own lunch at your desk is personal. If you want the books to apply the half-and-half rule for you, [Spark Books](/books) is free — upload your bank and card statements and it sorts them into a Canadian chart of accounts with the GST/HST already split. No card needed.