Meal and Entertainment Expenses – ITCs and ITRs
Registrants can claim input tax credits (ITCs) and input tax refunds (ITRs) to recover the GST and QST paid on meal and entertainment expenses. The calculation of ITCs and ITRs for such expenses is subject to the restrictions set forth in the Income Tax Act and the Taxation Act.
Meal and entertainment expenses are generally 50% deductible. Accordingly, ITCs and ITRs may be claimed for half of the GST and QST paid on such expenses. You can choose either of the following calculation methods.
You can claim 100% of the GST and QST paid on meal and entertainment expenses incurred in a given fiscal year. If you file annual returns, you must include 50% of the ITC and ITR claimed as an adjustment to the calculation of your net tax payable for the fiscal year. If you file monthly or quarterly returns, you must include 50% of the ITC and ITR claimed in the calculation of your net tax payable for the first reporting period immediately after the end of the fiscal year.
You can claim 50% of the GST and QST actually paid on meal and entertainment expenses during your reporting period. If you opt for this method, you do not have to make a 50% adjustment at the end of the fiscal year.
You can claim ITCs and ITRs for the GST and QST you reimbursed to employees or partners for meal and entertainment expenses they incurred in Canada. However, these expenses are subject to a limit of 50%.
No ITRs can be claimed for expenses exceeding the limits in the table below.
|$32,500 or less||2% of sales|
|More than $32,500 but less than $52,000||$650|
|$52,000 or more||1.25% of sales|
Special rules apply to ITCs and ITRs claimed for meal expenses of truck drivers.
Public institutions and charities that are registrants can claim ITCs and ITRs to recover all of the GST and QST paid on meals and entertainment related to their commercial activities.