When managing corporate expenses in Canada, understanding the tax treatment of meal and entertainment costs—especially those related to employee travel and external business engagements—is essential. The CRA has specific rules around what counts as a taxable benefit versus a deductible expense, and businesses must be clear on these distinctions to stay compliant and avoid penalties.
This blog outlines the key rules for 2025 related to meal reimbursements during business travel and entertainment expenses involving clients, partners, and external stakeholders.
1. Meal Expenses During Business Trips: Are They Taxable for Employees?
If a business reimburses an employee for meal costs incurred during a business trip, the reimbursement can be non-taxable if certain conditions are met:
When Meal Reimbursements Are Non-Taxable:
- The employee is required to travel as part of their job.
- The reimbursement reflects actual costs and is supported by itemized receipts.
- The expenses are considered reasonable based on the nature and location of the trip.
If all of the above apply, the reimbursement is not taxable income and does not need to be reported on a T4 slip.
When Meal Reimbursements Become Taxable:
- If the travel is not a job requirement (e.g. discretionary trips).
- If the reimbursement exceeds a reasonable amount.
- If the payment is a flat-rate allowance not tied to actual expenses.
Special Considerations:
- Remote or Special Work Sites: Reimbursements for employees working in designated locations may also be non-taxable, even with allowances.
- Spouse or Partner Travel: If a partner accompanies the employee for business-related reasons and expenses are reasonable, the reimbursement may also be non-taxable.
- Part-Time Employees: May qualify for non-taxable travel payments if the job site is at least 80 km from their residence and other job locations.
For more detail, see the CRA’s official page on Travel Expenses and Taxable Benefits.
2. Entertainment Expenses with External Stakeholders: Are They Deductible for Corporate Tax?
Expenses related to client meals, business development lunches, or tickets to events can be deductible—but only partially.
General Rule:
You can deduct 50% of the lesser of:
- The actual cost of the meal or entertainment.
- A reasonable amount based on the circumstances.
This includes:
- Meals with external professors, editors, scholars, and other business contacts.
- Tickets to sports events or shows for business development.
- Entertainment costs to maintain or grow business relationships.
Exceptions to the 50% Rule (Fully Deductible):
- Restaurants and Food Service Businesses: Costs of serving paying clients are fully deductible.
- Fundraising Events: For registered charities, related costs are fully deductible.
- Reimbursed Expenses: If you are reimbursed and can show documentation, the full amount is deductible.
- Taxable Employee Benefits: If the employee declares the meal or entertainment as part of income, the cost is fully deductible by the employer.
- Staff-Wide Events: Meals for all employees at events like holiday parties are fully deductible.
- Travel Bundles: Meals included in transportation costs (e.g., plane tickets) are not subject to the 50% limit.
Conference & Seminar Meals:
If meals are bundled into a registration fee, the CRA assumes $50/day of that fee is for meals/entertainment. The 50% rule applies to that amount.
Important Note:
Cruises, concerts, golf, and other entertainment activities are considered under the 50% limit unless specific exceptions apply.
For further guidance, you can review the CRA’s archived bulletin on Food, Beverages, and Entertainment Expenses (IT-518R).
Final Thoughts: Meal and Entertainment Tax Rules for 2025
Understanding when meal and entertainment expenses are taxable versus deductible is critical for Canadian businesses and employers. The distinction hinges on reasonableness, documentation, and context.
- Meal reimbursements for actual costs during required travel are typically non-taxable.
- Entertainment expenses can often be partially or fully deductible, depending on how and why they are incurred.
Need help navigating CRA guidelines on employee travel and entertainment expenses? Contact TMP today for expert advice on corporate tax compliance.
