Meals and entertainment expenses

You can claim an input tax credit (ITC) for the GST/HST you pay on reasonable meals and entertainment expenses that relate to your commercial activities by using, in most cases, the same limitation rules as those for income tax purposes. When the deduction for income tax purposes is limited to 50% of the cost of meals and entertainment expenses, then 50% of the GST/HST you pay on those expenses qualifies for an ITC.

Charities or public institutions do not have to reduce the amounts by 50% when they are entitled to claim an ITC for meals and entertainment expenses.

You can choose one of the following two ways to calculate your ITCs for meals and entertainment expenses:

• You can claim 100% ITCs for these expenses throughout your fiscal year. If you file monthly or quarterly GST/HST returns, add the 50% adjustment for the excess ITCs you claimed during the year to your net tax calculation for the first reporting period after the end of your fiscal year. If you file annually, add the 50% adjustment to your net tax calculation for that fiscal year. Enter the adjustment on line 104 of your GST/HST return.
• You can claim 50% of the actual GST/HST you pay on these expenses during each reporting period. By choosing this method, you do not have to make any adjustments at the end of your fiscal year.

Long-haul truck drivers
Long-haul truck drivers will be entitled to a higher ITC on food and beverage expenses beginning March 19, 2007. The ITC limit is increased from 50% to 60%. In 2008 the limit is further increased to 65% on food and beverages.

If you decide to claim the actual allowable ITC amount for food and beverage expenses, you claim 60% of the GST/HST that was paid or became payable on these expenses incurred on or after March 19, 2007. For food and beverage expenses incurred before to March 19, 2007, you still use the 50% limit.

If you are a quarterly or monthly filer and you decide to claim a 100% ITC for these expenses throughout the year, you need to make an adjustment for the excess ITCs you claimed during the year in your first reporting period for the following fiscal year. This means you will add a 50% adjustment for food and beverage expenses incurred before to March 19, 2007, and you will add a 40% adjustment to expenses incurred on or after March 19, 2007. Furthermore, if your fiscal year ends after December 31, 2007, you will add a 35% adjustment on food and beverage expenses incurred in 2008. Enter the adjustment on line 104 of your return.

For more information, see Meals expenses of long-haul truck drivers.

Notes
You can claim an ITC for the GST/HST you reimburse to your employees and partners for meals and entertainment expenses they incurred in Canada. However, these expenses are also subject to the 50% limit.

The same limits will apply to reimbursements paid after March 19, 2007, for food and beverage expenses for long-haul truck drivers.

Forms and publications

• Guide RC4022, General Information for GST/HST Registrants
• GST/HST Memoranda Series Chapter 8-1, General Eligibility Rules
• GST/HST Memoranda Series Chapter 8-2, General Restrictions and Limitations

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