The 50% Meals and Entertainment Rule: When You Can Deduct 100%

Section 67.1 of the Income Tax Act deems business meals and entertainment to be 50% of the lesser of what you actually paid and what would be reasonable in the circumstances. You still record the full expense; the deduction is halved. Six statutory exceptions let you claim 100%, and most small businesses qualify for at least one of them.

The 60-second version

The rule: food, beverages and entertainment are deemed to be 50% of the lesser of the amount paid and a reasonable amount. "Reasonable" is a second, independent test - an extravagant meal can be cut below 50%.[1]
Six exceptions allow 100%: you sell food for a living, a registered-charity fundraiser, costs billed on to a client and identified in writing, amounts taxed in an employee's hands, certain remote work sites and construction camps, and up to six staff events a year.[1]
The six-event rule is the one to use. Up to six special events per calendar year, at a particular place of business, generally available to all employees there, are fully deductible.[1]
GST/HST gets halved too, but through a different mechanism: you claim the full input tax credit, then add 50% of it back to net tax under section 236 of the Excise Tax Act.[5]
Meals on a plane, train or bus are not caught. The Act says so explicitly - no part of an airfare is treated as food or entertainment.[1]

How the rule actually works

Most people describe section 67.1 as "you can only deduct half your meals." That is the right answer to the wrong question. The provision does not disallow half the expense - it deems the amount paid to be 50% of a figure, and that figure is the lesser of two things: the amount actually paid or payable, and an amount that would be reasonable in the circumstances.[1]

That second limb matters and is routinely forgotten. If CRA considers $800 for a dinner for two unreasonable in the circumstances, the 50% is applied to the reasonable amount, not to the $800. Half of an unreasonable expense is not automatically deductible. In practice this rarely bites ordinary business meals, but it is the reason "we split the bill 50/50 so it's fine" is not a complete defence for lavish spending.

Note also what the section carves out at the top: it applies "for the purposes of this Act, other than sections 62, 63, 118.01 and 118.2."[1] Moving expenses, child care expenses and the medical expense credit are not subject to the 50% haircut, which surprises people who assume the rule is universal.

Finally, subsection 67.1(4) defines the edges. Entertainment "includes amusement and recreation" - so tickets, greens fees and event boxes are in scope, not just restaurant bills. And no amount paid for travel on an airplane, train or bus is considered to be in respect of food, beverages or entertainment consumed while travelling on it.[1] The meal in your economy fare is not a meal expense. The meal in the airport before boarding is.

The six exceptions worth knowing

Subsection 67.1(2) lists the situations where the 50% rule simply does not apply.[1] Read them as a checklist, because more small businesses qualify than realise it.

(a) You are in the business of providing it. Food, beverages or entertainment provided for, or in expectation of, compensation in the ordinary course of a business of providing them. A restaurant's food cost is not a "meals and entertainment" expense; it is cost of goods sold. Same for caterers and venues.

(b) A registered charity fundraiser. The amount must relate to a fund-raising event the primary purpose of which is to benefit a registered charity. A charity gala ticket is fully deductible as a business expense to the extent it is otherwise deductible; a golf day thrown by a supplier is not.

(c) You are reimbursed and you said so in writing. This is the one professional services firms live on. If the amount is one for which you are compensated, the compensation is reasonable, and it is specifically identified in writing to the person paying it, the 50% limit does not apply to you. Bill the client for the working lunch, itemise it on the invoice as a meal, and you deduct 100%. The 50% cut moves to your client, who is now the person who bore a meal cost. Fold it silently into a flat fee and the exception is unavailable, because nothing was identified in writing.

(d) It is taxable in someone's hands. Where the amount must be included in a taxpayer's income under section 6 - that is, it is a taxable employment benefit - the employer deducts it in full. The cost has already been taxed once; it is not halved as well.

(e) and (e.1) Remote work sites and construction camps. Two narrow but real exceptions. Broadly: food or beverages at a work site in Canada outside a population centre of at least 40,000 people and at least 30 kilometres from the nearest boundary of one, or provided at a construction work camp at or near a construction site where the worker is lodged. Neither applies to conferences, conventions or seminars.

(f) Up to six staff events a year. The practical favourite. An amount in respect of one of six or fewer special events held in a calendar year, at which the food, beverages or entertainment is generally available to all individuals employed by the person at a particular place of business, and is consumed by those individuals, is fully deductible.

Getting the six-event rule right

Three conditions, and all three have to hold.[1]

Six or fewer, per calendar year. Not per fiscal year. If your year-end is June 30, you still count January to December. The seventh event is back to 50%.

Generally available to all employees at a particular place of business. "All" is doing the work. A dinner for the management team is not a staff event. A holiday lunch for the whole Moncton office is - and if you have a second location, it gets its own six events, because the test is applied at a particular place of business.

Actually consumed by those individuals. The event has to happen and the staff have to be the ones eating.

The rule is a genuine planning opportunity for a small employer: six all-staff events a year, fully deductible, is a meaningful amount of goodwill bought at full value. It is also easy to substantiate - a calendar entry, an invitation to everyone at that location, and the receipt.

Conferences and conventions: the deemed $50 a day

Conference fees are a common source of confusion, and subsection 67.1(3) resolves it with a specific rule.[1]

Where a fee for a conference, convention, seminar or similar event entitles the participant to food, beverages or entertainment - other than incidental beverages and refreshments made available during meetings or receptions - and a reasonable part of the fee is not identified in the account as compensation for it, then $50 per day on which food, beverages or entertainment is provided is deemed to be the amount paid for it. That $50 is then subject to the 50% rule, and the remainder of the fee is deductible as a conference fee.

So a $1,500 three-day conference with unitemised meals is treated as $150 of meals - of which $75 is deductible - plus $1,350 of fully deductible conference fee. Coffee and pastries at the back of the room do not trigger this; they are the incidental refreshments the subsection excludes.

If the organiser does itemise the meal component on the invoice, you use their number instead of the $50 deeming rule. It is worth checking the invoice before assuming.

Long-haul truck drivers: 80%

Subsection 67.1(1.1) replaces 50% with a "specified percentage" for meals consumed by a long-haul truck driver during an eligible travel period. For amounts paid or payable after 2010, that percentage is 80%.[1]

The definitions are precise. A long-haul truck is designed for hauling freight with a gross vehicle weight rating exceeding 11,788 kilograms. A long-haul truck driver is an individual whose principal business or principal duty of employment is driving one. An eligible travel period means being away from the municipality or metropolitan area of the driver's specified place for at least 24 continuous hours, hauling to or from a location beyond a 160-kilometre radius of that specified place.[1]

Miss any one of those and you are back to 50%. A local delivery driver home each night does not qualify no matter what they are driving.

The GST/HST side nobody expects

The 50% limit has a sales-tax twin, and it works differently enough to catch people out. You do not claim half the input tax credit on a restaurant bill. You claim the full ITC, and then section 236 of the Excise Tax Act requires you to add an amount back in determining your net tax for the appropriate reporting period - 50% of the tax claimed where the 67.1(1) rule applied, and 20% where the long-haul 80% rule applied.[5]

The add-back is done once, in the reporting period that follows the end of the fiscal year, not on every return. The economic result matches the income tax treatment, but the mechanics do not, and a bookkeeper who simply claims 50% of the tax all year and never does the add-back has produced the right-ish number by the wrong route - which is exactly the kind of inconsistency that is awkward to explain on review.

What to actually record

Section 230 of the Income Tax Act requires records adequate to determine your obligations - and for meals, "adequate" has a well-understood shape.[7] On or with every meal and entertainment receipt, capture:

Who was there, by name, and their relationship to the business
What was discussed - one line naming the client, project or purpose
Which exception, if any, you are relying on - especially "staff event 3 of 6" or "rebilled to client, itemised on invoice 1042"

The receipt alone proves you spent money at a restaurant. It does not prove the expense was incurred to earn income, and that is the part actually in dispute when this comes up. Post the result to GIFI 8523, Meals and entertainment - not to a catch-all line, and never to 9270.

Where this goes wrong

Recording the expense at 50%. Book the full amount and let the 50% adjustment happen at the tax computation. Halving it in the books destroys the audit trail back to the receipt and makes your GST/HST add-back impossible to compute.

Treating client-rebilled meals as 50%. If it is itemised in writing on the invoice, it is 100% to you. Firms give this up by burying disbursements in a flat fee.

Counting staff events on a fiscal year. The six-event limit is a calendar year. An October year-end does not reset it.

Calling a management dinner a staff event. It must be generally available to all employees at that place of business.

Halving the ITC directly. Claim in full, add back under section 236. Same result, correct mechanics.

Assuming entertainment means restaurants. Amusement and recreation are included. Golf, concerts, sporting events and box seats are all in scope.

The bottom line

Section 67.1 is not a penalty on business hospitality. It is a rough proxy for the personal enjoyment element in a business meal, applied bluntly at 50% so nobody has to litigate how much of dinner was work.

The money in it, for a small Canadian business, is not in arguing about the 50%. It is in the exceptions - particularly the six annual staff events and the written-rebilling rule - and in keeping records good enough that the expense was clearly incurred to earn income in the first place. Get those two right and the halving takes care of itself.

Frequently asked questions

Can I deduct 100% of business meals in Canada?

Only in six situations set out in subsection 67.1(2) of the Income Tax Act: you are in the business of providing food, beverages or entertainment; the cost relates to a registered charity fundraiser; you are compensated for the amount and it is reasonable and specifically identified in writing to the payer; the amount is a taxable benefit included in someone's income under section 6; it relates to certain remote work sites or construction work camps; or it is one of six or fewer special events in a calendar year generally available to all employees at a particular place of business. Otherwise the deduction is 50%.

How many staff parties can a Canadian business fully deduct?

Up to six per calendar year. Each event must be generally available to all individuals employed at a particular place of business and actually consumed or enjoyed by them. The limit runs on the calendar year, not your fiscal year, and each separate place of business gets its own count of six.

Are meals included in a conference fee subject to the 50% rule?

Yes, but through a deeming rule. Under subsection 67.1(3), if the fee entitles you to food, beverages or entertainment and the invoice does not separately identify a reasonable amount for it, $50 per day on which it is provided is deemed to be the meal cost and is subject to the 50% limit. The rest of the fee remains fully deductible. Incidental beverages and refreshments made available during meetings or receptions do not trigger the rule, and if the organiser itemises the meal component you use their figure instead.

Do I only claim half the GST/HST input tax credit on meals?

No. Claim the full input tax credit, then add an amount back when determining net tax under section 236 of the Excise Tax Act - 50% of the tax where the ordinary 67.1(1) rule applied, or 20% where the long-haul truck driver rule applied. The add-back is made once, in the reporting period following the end of the fiscal year, rather than on each return.

Is the meal on my flight a 50% expense?

No. Paragraph 67.1(4)(a) states that no amount paid for travel on an airplane, train or bus is considered to be in respect of food, beverages or entertainment consumed while travelling on it. Your airfare is fully deductible travel. A meal bought at the airport before boarding is a separate expense and is subject to the 50% limit.

What percentage can long-haul truck drivers deduct for meals?

80% for amounts paid or payable after 2010, under subsection 67.1(1.1). The driver's principal business or duty of employment must be driving a long-haul truck with a gross vehicle weight rating over 11,788 kilograms, and the meals must be consumed during an eligible travel period - away from the specified place for at least 24 continuous hours, hauling to or from beyond a 160-kilometre radius.

Sources cited in this article

Income Tax Act, section 67.1 - Expenses for food, etc.
Primary source for the 50% deeming rule, the six exceptions in 67.1(2), the deemed $50 per day convention rule in 67.1(3), the travel and entertainment definitions in 67.1(4), and the long-haul truck driver percentages.
https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-67.1.html
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.)
The governing statute. Section 6 sets out the employment benefit inclusions referenced by the 67.1(2)(d) exception.
https://laws-lois.justice.gc.ca/eng/acts/i-3.3/
CRA - T4002, Self-employed Business, Professional, Commission, Farming and Fishing Income
CRA's administrative guidance on deducting business expenses, including meals and entertainment, for unincorporated businesses.
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002.html
CRA - T4130, Employers' Guide: Taxable Benefits and Allowances
Relevant to the 67.1(2)(d) exception, where a meal or entertainment cost is included in an employee's income as a taxable benefit.
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4130/employers-guide-taxable-benefits-allowances.html
Excise Tax Act, section 236 - Food, beverages and entertainment
The GST/HST add-back that mirrors the income tax limitation, including the 50% and 20% factors.
https://laws-lois.justice.gc.ca/eng/acts/E-15/section-236.html
CRA - RC4022, General Information for GST/HST Registrants
Input tax credit rules and the mechanics of net tax reporting.
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4022/general-information-gst-hst-registrants.html
Income Tax Act, section 230 - Records and books
The statutory requirement to keep records adequate to determine tax obligations, which is what a bare restaurant receipt does not satisfy on its own.
https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-230.html

All sources verified 2026-08-12. Spotted a link that has moved? Email support@mapleexpense.com and we will correct it.