How much GST/HST can my client claim as an input tax credit on meals and entertainment, and when does the 50% adjustment go in?
For 2026, your client recovers 50% of the GST/HST paid on meals and entertainment that are 50% deductible under section 67.1, or 80% for long haul truck drivers. It can claim 50% each period, or claim 100% and add back half (20% for truckers) in the first return after year end. Charities and public institutions have no add back.
How much of the GST/HST on a meal does your client keep?
Section 236 of the Excise Tax Act ties the input tax credit to the income tax limit. Where subsection 67.1(1) of the Income Tax Act cuts a food, beverage or entertainment cost to 50%, your client adds back 50% of the ITC it claimed. Where subsection 67.1(1.1) gives a long haul truck driver 80%, the add back is 20% laws-lois.justice.gc.ca. A meal that isn't limited by 67.1 at all keeps its full credit.
| Situation | Income tax deduction | Share of the GST/HST kept as an ITC |
|---|---|---|
| Client meals, drinks, event tickets | 50% | 50% |
| Your client's own meals while travelling | 50% | 50% |
| Reasonable meal allowance or 100% reimbursement to an employee | 50% | 50% |
| Long haul truck driver, food during an eligible travel period | 80% | 80% |
| One of six or fewer events a year open to all staff at a location | 100% | 100% |
| Meal billed to a customer and identified in writing on the bill | 100% | 100% |
| Meal included in an employee's income under section 6 | 100% | No add back under section 236 |
| Restaurant, hotel or caterer selling food for pay | 100% | 100% |
| Charity or public institution, commercial activities | Not relevant to the ITC | 100% |
| Membership dues in a dining, golf or recreation club | 0% | 0% |
The 100% rows come from the exceptions in subsection 67.1(2), which switch off the 50% limit for those costs laws-lois.justice.gc.ca. Because section 236 only bites where 67.1(1) or 67.1(1.1) applies, those meals don't trigger an add back. The 80% for truck drivers is the specified percentage in 67.1(5) for amounts paid after 2010
laws-lois.justice.gc.ca. Club dues are a separate rule: paragraph 170(1)(a) denies any ITC on a membership in a club whose main purpose is dining, recreational or sporting facilities
laws-lois.justice.gc.ca.
Charities and public institutions are carved out by subsection 236(2) laws-lois.justice.gc.ca. The CRA says they may be able to claim 100% ITCs on eligible meal and entertainment expenses, and adds that most charities have to use a special net tax calculation for claiming ITCs, so the 100% only matters for the ITCs a charity can claim at all
canada.ca. The income tax side of the 50% rule, with every exception, is on the meals and entertainment deduction page.
Claim 50% as you go, or claim 100% and add back half after year end
The CRA lets a regular method registrant pick either approach. Claim 50% of the GST/HST actually paid in each reporting period and make no adjustment at year end, or claim 100% through the fiscal year and add back the excess once canada.ca.
| Your client files | When the add back goes in | Where on the return |
|---|---|---|
| Annually | The return for that same fiscal year | Line 104 (NETFILE or paper) |
| Quarterly | The first quarter of the next fiscal year | Line 104 (NETFILE or paper) |
| Monthly | The first month of the next fiscal year | Line 104 (NETFILE or paper) |
| Any frequency, filing by TELEFILE | Same timing as above | Inside the line 105 calculation |
| Any frequency, registration cancelled | The reporting period in which registration ends | Final return |
The timing comes from subsection 236(1.1): the period of deregistration if that happens first, the fiscal year itself for an annual filer, and otherwise the reporting period beginning immediately after the fiscal year laws-lois.justice.gc.ca. The line placement is from guide RC4022, which puts the adjustment on line 104 for NETFILE and inside the line 105 calculation for TELEFILE
canada.ca. The CRA's line by line return instructions agree: line 104 is the adjustment line, and TELEFILE has no line 104
canada.ca. The rest of the return is on the GST/HST return lines page.
So a quarterly filer with a December 31 year end that claims 100% on its 2026 meals carries the add back on its January to March 2027 return. The 50% as you go method avoids the year end step but means splitting every restaurant bill in the books, and only for the limited meals: a staff party that qualifies under 67.1(2)(f) still gets 100%.
How much does an Ontario corporation add back on its first 2027 quarter?
Worked example: an Ontario corporation, regular method, quarterly filer, December 31 year end, claims 100% of its meal ITCs through 2026. HST is 13%.
| 2026 cost before HST | HST (ITC claimed in 2026) | Limited by 67.1(1)? | Added back in Q1 2027 |
|---|---|---|---|
| Client dinners, $6,000 | $780.00 | Yes | $390.00 |
| Holiday party for all office staff, one of six events, $3,000 | $390.00 | No, 67.1(2)(f) | $0 |
| Meals rebilled to a customer and itemized on the invoice, $1,000 | $130.00 | No, 67.1(2)(c) | $0 |
| Meal allowance, $50 a day for 20 days of travel in Ontario: $1,000 × 13/113 | $115.04 | Yes | $57.52 |
| Total | $1,415.04 | $447.52 |
The corporation keeps $1,415.04 minus $447.52, so $967.52 of ITCs. Had it used the 50% method, it would have claimed $390 + $390 + $130 + $57.52 = $967.52 during the year and nothing would go in the 2027 return. Same total, different timing. The allowance line uses the CRA's allowance factor of 13/113 for Ontario HST, multiplied by the 50% eligibility for meals canada.ca.
On the income tax side, the $447.52 of HST that comes back becomes part of the meal cost that is 50% deductible. That arithmetic is worked through on the meals and entertainment deduction page. A restaurant bill under $100 only needs the supplier name, date and total to support the credit; from $100 it also needs the HST number, as set out on the ITC documentation page.
Allowances and reimbursements to employees are cut the same way
A reasonable allowance paid to an employee or partner for taxable supplies in Canada is deemed under section 174 to be a supply to your client, with tax deemed paid at the allowance times the tax fraction, and a reimbursement is deemed under section 175 to carry the tax the employee paid times the share reimbursed laws-lois.justice.gc.ca. Paragraph 236(1)(a) names both, so the 50% add back reaches meal allowances and meal reimbursements too
laws-lois.justice.gc.ca.
The CRA's conditions: your client gets the full ITC on a reimbursement (50% for meals) only when it reimburses 100% of the expense, and a partial reimbursement prorates the credit. For allowances, the factor is 5/105 for GST, 13/113 for 13% HST or 15/115 for 15% HST, then the meal eligibility percentage applies canada.ca. The CRA's list skips Nova Scotia, but the section 174 formula (the rate over 100% plus the rate) gives 14/114 for its 14% HST
laws-lois.justice.gc.ca. The allowance has to be one your client reasonably considered reasonable when it paid it; whether it is taxable to the employee is covered on the CRA meal allowance rates page.
Unreasonable amounts drop out first. Subsection 170(2) limits ITCs to costs that are reasonable in nature and amount laws-lois.justice.gc.ca, and subsection 236(1.2) then takes the unreasonable part, with its tips and taxes, out of the base before the 50% is applied
laws-lois.justice.gc.ca.
Long haul truckers add back 20%, and quick method filers add back nothing
Long haul truck drivers. Food and drinks during an eligible travel period are 80% deductible, so the add back is 20% laws-lois.justice.gc.ca. An Ontario owner driver who spends $5,000 before HST on road meals in eligible periods claims $650 of ITCs, adds back $650 × 20% = $130, and keeps $520. The CRA's own example is $100 of ITCs claimed in a year and a $20 adjustment in the first quarter of the next one
canada.ca. Meals on a short local run fall back to 50%. Employed drivers claiming meals on their own return are covered on the TL2 page.
Quick method. A quick method filer can't claim ITCs on most purchases, and the CRA says the remittance rates already account for ITCs on operating expenses canada.ca. No meal ITC means nothing to add back. Capital purchases and real property still earn a credit; more on the quick method page.
Simplified method. Your client leaves 50% of meal and entertainment costs out of the total it multiplies by the tax factor, or includes 100% and makes the 50% adjustment at year end, the same choice as the regular method. The method is open to registrants with $1 million or less of annual worldwide taxable supplies and $4 million or less of taxable purchases in Canada in the last fiscal year canada.ca.
Sources
What happens to the ITC on a seventh staff party in the same year?
It drops to 50%. Paragraph 67.1(2)(f) covers only six or fewer special events in a calendar year open to all employees at a place of business laws-lois.justice.gc.ca, so the seventh is limited by 67.1(1) and section 236 adds back half its ITC
laws-lois.justice.gc.ca.
Does the 50% apply to my client's own meals on a business trip, not just client meals?
Yes. Subsection 67.1(1) covers any human consumption of food or beverages and entertainment, not only meals with customers laws-lois.justice.gc.ca, so the add back applies to travel meals too.
My client is cancelling its GST/HST registration partway through the year. When does the add back go in?
In the reporting period in which the registration ends. Paragraph 236(1.1)(a) overrides the usual next period rule for a registrant that ceases to be registered laws-lois.justice.gc.ca.
Can my client claim an ITC on golf club dues if it entertains clients there?
No. Paragraph 170(1)(a) denies any ITC on a membership in a club whose main purpose is dining, recreational or sporting facilities laws-lois.justice.gc.ca. Meals bought at the club are a separate purchase and follow the 50% rule.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.