Claiming Meals and Entertainment: What Restaurant Owners Can Deduct (and What They Can’t) — CPA Firm Near You, Montreal

Introduction

Meals and entertainment expenses are a common deduction for restaurant owners, but they are also one of the most frequently challenged items during CRA and Revenu Québec audits. Many business owners mistakenly assume that all restaurant meals are deductible, but tax rules impose strict limits, exceptions, and documentation requirements. This guide explains which meals qualify, how much is deductible, what proof you must keep, and how a CPA firm near you in Montreal can help you avoid costly reassessments.

Legal and Regulatory Framework

The Income Tax Act and the Taxation Act of Quebec restrict the deductibility of meals and entertainment to 50 percent in most cases. The deduction applies only to expenses incurred to earn business income. CRA’s administrative policies require detailed receipts showing date, place, attendees, purpose of the meal, and amount spent. Revenu Québec imposes similar requirements and may deny the deduction if documentation is incomplete or if the expense appears personal. Certain exceptions allow full deductibility, including meals for long-haul trucking, taxable benefits to employees, or specific promotional events. Alcohol is deductible under the same rules but must meet the business purpose test.

Key Court Decisions

Courts consistently rule that meals lacking proper documentation or a clear business purpose are non-deductible. In several decisions, taxpayers failed to list business attendees, resulting in full denial of the expense. Other rulings emphasize that excessively frequent restaurant meals may be deemed personal. Courts have also ruled that the burden of proof rests entirely on the taxpayer, and poor record-keeping cannot be corrected with after-the-fact explanations.

Why CRA and Revenu Québec Target Meals

Meals and entertainment are high-risk because many taxpayers mix personal and business spending. CRA algorithms look for patterns such as daily restaurant charges, high employee meal frequency, or inconsistent expense patterns. Revenu Québec often requests all meal receipts during an audit and denies any that lack documentation. Businesses with high meal expenses relative to revenue or industry averages are automatically flagged. Proper categorization and documentation reduce the likelihood of a reassessment.

Mackisen Strategy

At Mackisen CPA Montreal, we help businesses establish a compliant meal expense process. This includes creating strict internal policies, building expense templates, categorizing 50 percent versus 100 percent deductible items, documenting client meetings properly, and maintaining secure digital receipts. We also review meal claims during bookkeeping and year-end adjustments to ensure they meet CRA and Revenu Québec criteria. If you are audited, we prepare complete explanations, reconstruct records, and defend your deductions.

Real Client Experience

A restaurant owner in Montreal faced a reassessment after auditors denied dozens of meals due to missing attendee details. By reconstructing agendas, emails, and business logs, we demonstrated the legitimate business purpose of many expenses. This reduced the reassessed amount and helped the client establish a permanent documentation system that prevented future issues while keeping permissible deductions intact.

Common Questions

Are all meals 50 percent deductible?

Most meals are limited to a 50 percent deduction, but certain promotional, employee, and travel-related meals can be fully deductible if properly documented.

Are staff meals deductible?

Yes, but they may create a taxable benefit if provided regularly without a business purpose.

How should restaurant owners document meals?

Keep itemized receipts, list attendees, describe the business purpose, and store records digitally for at least six years.

Does alcohol follow the same rules?

Yes. Alcohol expenses are deductible under the same meal and entertainment rules.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.