Meal Allowance and Taxation for Canadians
Canadian Tax Authority Tweaks Taxation of Employee Benefits
The Canada Revenue Agency (CRA) released Income Tax Technical News (ITTN) No. 40, which deals with administrative policy changes for taxable employment benefits, including over-time meals and allowances, employer-provided motor vehicles, and non-cash gifts and non-cash awards. (All dollar figures expressed are Canadian dollars.)
The maximum amount you can claim for food, beverages, and entertainment expenses is 50% of either the amount you incur or an amount that is reasonable in the circumstances, whichever is less. These limits also apply to the cost of your meals when you travel or go to a convention, conference, or similar event.
Entertainment expenses include tickets and entrance fees to an entertainment or sporting event, gratuities, cover charges, and room rentals such as for hospitality suites.
Over-time Meals and Allowances
Pre 2009, the CRA allowed for a non-taxable status of certain over-time meals or reasonable allowances for over-time meals in certain situations. Specifically, the employee must have worked three or more hours of over-time right after his or her scheduled hours of work and the over-time was infrequent and occasional in nature (less than three times a week).
Effective for 2009, the CRA says it will consider no taxable benefit to arise:
• If the value of a meal or meal allowance is reasonable (up to $17).
• If the employee works two or more hours of over-time right before or right after his or her scheduled hours of work.
• If the over-time is infrequent and occasional in nature (less than three times a week). This condition may also be met where the meal or allowance is provided three or more times per week on an occasional basis to meet work-load demands such as major repairs or periodic financial reporting.
Where the over-time occurs frequently, the CRA considers the over-time meal allowances to be a taxable benefit because they take on the characteristics of additional remuneration.
Long-haul truck drivers
For 2009, 70% of expenses for food and beverages consumed by a long-haul truck driver during an eligible travel period are deductible.
This deductible amount will increase to 75% in 2010 and to 80% after 2010. An eligible travel period is a period of at least 24 continuous hours throughout which the driver is away from the municipality and metropolitan area in which the driver resides (the residential location) and is driving a long-haul truck that transports goods to, or from, a location that is beyond a radius of at least 160 kilometres from the residential location.
You can deduct travel expenses you incur to earn business and professional income. Travel expenses include public transportation fares, hotel accommodation, and meals. In most cases, the 50% limit applies to the cost of meals, beverages, and entertainment when you travel. The 50% limit also applies to the cost of food and beverages
served and entertainment enjoyed when you travel on an airplane, train, or bus when the ticket price does not include such amounts.
You can deduct the cost of going to a maximum of two conventions a year. The conventions have to:
¦ relate to your business or professional activity; and
¦ be held by a business or professional organization within the geographical area where the organization normally conducts its business. This second limit may not apply if an organization from another country sponsors the convention and the convention relates to your business or professional activity. Sometimes, convention fees include the cost of food, beverages, or entertainment. However, the convention organizer may not show these amounts separately on your bill. If this is the case, subtract $50 from the total convention fee for each day the organizer provides food, beverages, or entertainment. You can deduct this daily $50 amount as a meal and entertainment expense. However, the 50% limit applies to the daily $50 amount.
These limits do not apply if:
¦ your business regularly provides food, beverages, or entertainment to customers for compensation (for example, a restaurant, hotel, or motel);
¦ you bill your client or customer for the meal and entertainment costs, and you show these costs on the bill;
¦ you include the amount of meal and entertainment expenses in an employee’s income or would include them if the employee did not work at a remote or special work location; in addition, the amount is not paid or payable in respect of a conference, convention, seminar,
or similar event; the special work location must be at least 30 kilometres from the closest urban centre that has a population of 40,000 or more people;
¦ you incur meal and entertainment expenses to provide a Christmas party or similar event, and you invite all your employees from a particular location; however, you are limited to six of these events each year;
¦ the meal and entertainment expenses you incur are for a fund-raising event that was mainly for the benefit of a registered charity; or
¦ you provide meals to an employee housed at a temporary work camp constructed or installed specifically for the purpose of providing meals and accommodation to employees working at a construction site; in addition, the employee cannot be expected to return home daily.