Can I claim input tax credits on meals and entertainment?

The 50% rule and why it mirrors the income tax limit

Client dinners, business lunches, and entertainment such as event tickets are all subject to the same restriction on the GST/HST side that already applies on the income tax side: only 50% of the cost is treated as a deductible business expense, and only 50% of the GST/HST paid on that cost is claimable as an input tax credit. The two rules are deliberately aligned so a business does not end up recovering more tax than the portion of the expense it can actually deduct.

This applies whether the meal is a quick coffee meeting or a full client dinner, and whether it is paid on a corporate card or reimbursed to an employee through an expense report. The restriction is on the category of expense, not on how it was paid for, and it applies the same way whether the client being entertained is a prospect, an existing customer, or a referral source.

Tickets to a sporting event, a round of golf with a client, or a private box at a concert all fall under the same entertainment category as a restaurant meal for this purpose, even though the expense might be coded separately in a general ledger. Grouping these costs under a clear meals and entertainment label, rather than scattering them across marketing, travel, or general office accounts, is what makes the 50% restriction straightforward to apply at filing time.

Exceptions that restore full recovery

A handful of situations fall outside the general 50% restriction and allow a full ITC claim instead.

• Staff parties, such as a holiday party or summer event open to all employees, are fully recoverable up to six such events in a calendar year; beyond that number, the general 50% rule applies to the additional events.
• Meals at a remote work site where no reasonable commercial alternative exists, such as a camp kitchen on an isolated project, are generally fully recoverable rather than restricted.
• Meals purchased for resale, such as ingredients a restaurant buys to prepare and sell to its own customers, are a normal cost of inventory, not an entertainment expense, so the 50% restriction does not apply.
• Meals related to a fundraising event for a registered charity generally fall outside the restriction as well, reflecting the different purpose of the expense.

Outside of these specific carve-outs, the default assumption should be that a meal or entertainment cost is restricted to 50%, not the other way around. A business that assumes an exception applies without checking the specific conditions risks overclaiming, which is one of the more common findings in a GST/HST review, and it is a mistake our guide to common GST/HST mistakes covers alongside several other coding errors that tend to repeat across small businesses.

Long-haul truck drivers: an 80% rate instead of 50%

Long-haul truck drivers face a special rule that reflects how central meals on the road are to the job: rather than the general 50% limit, both the income tax deduction and the related ITC are calculated at 80% of eligible meal costs incurred during an eligible long-haul trip. This higher rate does not extend to entertainment costs, only to meals, and only within the specific conditions that define an eligible long-haul trip for this purpose, so a driver's shorter local trips or non-driving staff would still fall under the general 50% rule. A trucking company with a mixed fleet of long-haul and local routes needs to track which trips actually qualify, since applying the 80% rate to every meal claimed across the business, regardless of the route, would overstate the ITC.

How to record this correctly in QuickBooks

The most common mistake we see is a meals and entertainment expense coded to a general category and its full GST/HST claimed as an ITC, rather than isolated so only 50% flows through to the return. Setting up a dedicated meals and entertainment expense account, separate from other travel or office costs, makes it much easier to apply the restriction consistently rather than catching it manually at year-end.

For businesses that also hold staff parties or operate a remote work site, a second, separate account for those fully recoverable costs keeps them from being lumped in with the restricted category by default. This small setup step avoids either under-claiming ITCs you are entitled to or over-claiming ones you are not, and it also makes the income tax side of the same expenses easier to prepare at year-end, since the same 50% split generally carries through to the corporate or personal return.

A quarterly glance at the meals and entertainment account, rather than waiting for year-end, also makes it easier to spot a miscoded expense while the original receipt and context are still fresh, instead of trying to reconstruct the purpose of a dinner from months earlier.

How we handle meals and entertainment coding for clients

We set up expense categories that separate restricted meals and entertainment from the fully recoverable exceptions, so the 50% cap is applied automatically rather than reconstructed during return preparation. Where a client runs a restaurant, catering business, or food truck, we also make sure ingredient purchases for resale are coded as inventory rather than accidentally swept into the restricted meals category, and our bookkeeping services build this distinction into the chart of accounts from the outset rather than fixing it after the fact.