Section 67.1

Subsection 67.1(1) - Expenses for food, etc.

Cases

Canada v. Stapley, 2006 DTC 6075, 2006 FCA 36

The taxpayer, who was a real estate agent, was only entitled to deduct one-half of the cost of gift certificates for food and beverages, and of tickets to various sporting events and concerts, purchased for clients. Although it would be contrary to a purposive interpretation of the provision to apply the denial because the taxpayer did not consume any food or enjoy any of the entertainment in issue, the plain meaning of the provision (there being nothing in it to limit its application to situations in which the taxpayer participated in the consumption of the food or beverages or in the enjoyment of the entertainment, and the phrase "in respect of" having a wide meaning) and the scheme of the provision (there being two exceptions in s. 67.1(2) that would be redundant if the provision only applied where the taxpayer had such personal consumption) indicated that the provision applied.

See Also

Rogers v. The Queen, 2014 DTC 1109 [at 3230], 2014 TCC 101 (Informal Procedure)

reasonableness cannot raise expense above the 50% limit

Lyons J found that the taxpayer's arguments about the reasonableness of her meal costs as business expenses were irrelevant given the clear wording of the 50% limit in s. 67.1.

Stogrin v. The Queen, 2012 DTC 1021 [at 2599], 2011 TCC 532 (Informal Procedure)

The taxpayer argued that the 50% limitation on meal expense deductions in s. 67.1 was discriminatory because it did not produce a roughly equivalent economic benefit to that enjoyed by government employees with respect to similar expenses. Hogan J. dismissed the argument. Section 67.1 has repeatedly held up under Charter scrutiny.

Transport Baie-Comeau Inc. v. The Queen, 2008 DTC 2839, 2006 TCC 108

The taxpayer, a long-haul trucking company, ceased to reimburse its drivers for their meal expenses and commenced paying them an additional allowance, termed a "lodging allowance", of $0.04 per kilometre. Given that the drivers were free to spend the allowance as they chose it did not constitute a meal allowance.

Powrmatic du Canada Ltée, 94 DTC 1206 (TCC)

The taxpayer, which ran sales contests enabling its customers to be sent on trips to Latin America at discounted prices to them, was not precluded from deducting 100% of the amount spent by it on such trips because, from its perspective, the amounts were not paid for "the enjoyment of entertainment" but, rather, as business trips that would increase its sales.

In addition, the exemption in s. 67.1(2)(c) was available because the taxpayer was compensated for the cost to it of the trips through increased sales, as measured through "points" earned by the customers pursuant to a system contained on documents provided to them.

Administrative Policy

5 October 2018 APFF Roundtable Q. 8, 2018-0768791C6 F - Frais de repas

s. 67.1(1) applies to client portion of restaurant tab even where s. 8(4) applies to employee

CRA effectively confirmed that by virtue of the combined operation of s. 8(4) and s. 67.1(1), the deduction for when a commissioned employee takes a client out to a restaurant within the metropolitan area of the employer is limited to 25% of the bill, i.e., a complete denial for the employee’s portion under s. 8(4) and a 50% denial for the client’s portion under s. 67.1(1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(4) commissioned employees can deduct only 25% of the restaurant tab when they take out a client in the city 201

9 April 2018 External T.I. 2017-0714381E5 F - Application de l'article 67.1

hockey game tickets purchased by a hockey player recruiter are subject to s. 67.1

Are amounts paid by a hockey player recruiter in the course of his employment for the purchase of tickets to attend hockey games subject to s. 67.1? CRA responded:

Since a hockey game is an athletic event, we are of the view that the amounts paid by a hockey player recruiter for the purchase of tickets to hockey games are subject to section 67.1 even if these amounts were paid by a taxpayer in the course of his or her employment.

Respecting whether a gala or a recognition party organized by a professional association is entertainment for the purposes of s. 67.1, CRA stated that this was a question of fact on which it would not comment in the context of a technical interpretation.

Words and Phrases
entertainment

4 November 2014 External T.I. 2014-0521211E5 F - Cartes-cadeau d'une chaîne de supermarchés

50% limitation applicable to gift cards exchangeable at supermarket

A corporation which promotes the sale of non-food products provides individuals who attend its product presentations with gift cards. The cards are exchangeable for beverages or for food or non-food products at a supermarket chain. Is the cost of the cards fully deductible to the corporation? CRA responded (TaxInterpretations translation):

[I]n the absence of supporting documents to the contrary, the cost of a gift card used for promotional purposes constitutes an expense for food or beverages when the gift card is exchangeable for merchandise in an establishment that is primarily engaged in selling foods and beverages. Thus the expense in question would be subject to the 50% limitation unless the corporation could establish that the gift card was in reality exchanged for products or services which did not come within the ambit of subsection 67.1(1).

5 June 2013 Internal T.I. 2013-0490941I7 F - Expenses for food 67.1(1)

AD-98-24 (respecting allocation of construction-worker living allowances to food) still in effect

Is the agreement between the CRA and the Canadian Construction Association and the Canadian Association of Oilwell Drilling Contractors (released on September 21, 1998 in Communiqué AD-98-24), respecting the application of the s. 67.1 restrictions to construction-project living allowances, still in effect?

CRA confirmed that it is still in effect.

22 October 2012 External T.I. 2012-0452491E5 F - Repas fournis dans le cadre d'une formation

trainees required to break out meal portion of their invoices even if not separately identified

As part of the carrying on of its training business, the taxpayer provides breakfast and dinner, as well as a coffee break. Respecting the deductibility of the “meal” portion of the charges to the trainees, CRA stated:

[S]ince there is no exception that would allow participants to avoid the application of subsection 67.1(1) … the expenses they incurred for food and beverages paid during training, even if not identified separately, should be subject to the 50% limit in subsection 67.1(1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(a) Pink Elephant followed/potential exception for training business where it breaks out meals on its invoices 185
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Know-How and Training training expenses deductible (subject to s. 67.1(1)) provided that no new skill or qualification is acquired 132
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(h) deductibility of meal portion of training charges may be denied under s. 18(1)(h) 100

2 January 1994 T.I. 940531

Gift certificates constitute food expenses, the deductibility of which is governed by s. 67.1(1).

Subsection 67.1(2) - Exceptions

Paragraph 67.1(2)(a)

See Also

Nicholls v. The Queen, 2011 DTC 1295 [at 1666], 2011 TCC 39

meals can be minor component and non-itemized
a.k.a. Pink Elephant case

The taxpayer carried on a business of providing information technology training courses, many of which were provided at a hotel where breakfast and lunch were provided to participants. The course fee did not itemize a charge for these meals. These catering expenses were deductible under s. 67.1(2)(a). It was irrelevant whether the provision of the meals was a minor or significant part of the ordinary course of business of the taxpayer's business - Webb J. noted (at para. 10) that, for example, airlines were allowed to deduct passenger meal expenses under IT-518R (para. 9). Webb J. also stated (at para. 13):

Not identifying [on the invoices] each item that is provided as part of a package does not mean that any particular item is not being provided for compensation.

Administrative Policy

S3-F6-C1 - Interest Deductibility

1.91 Interest thereon. The restriction or prohibition of the deductibility of an expense under a specific provision…may also extend to interest paid on borrowed money used to pay the expense. In some situations, the wording of a particular provision will extend to any expense incurred in respect of a given use such that the interest expense would also be denied (for example, section 67.5). In other situations, the wording of the provision would not, in and of itself, restrict interest deductibility (for example, section 67.1).

21 November 2014 External T.I. 2014-0553081E5 - Paragraph 67.1(2)(a)

extension of Pink Elephant to trade expositions

In Pink Elephant, the exception in s. 67.1(2)(a) was applicable to a taxpayer who provided information technology training courses to its clients, with food and beverages being consumed by them during the training. Would a taxpayer whose business includes organizing, promoting, and supplying "buying expositions" for compensation which includes providing food, beverages and entertainment also qualify for the exception in s. 67.1(2)(a)? CRA responded:

[W]here all or part of a taxpayer's ordinary business includes putting on one or more events, such as a trade exposition, for compensation and food, beverages or entertainment is provided to its customers as part of such an event, it is our view that such a situation would be similar to Pink Elephant.

4 March 2014 External T.I. 2014-0519051E5 - Meals and Entertainment Expenses

"paying customers" required

The Company is required to provide meals (i.e., hot meals, beverages, snacks, fruit etc.) to employees during certain events (not described), and hires chefs/cooks to prepare meals using rented or temporary kitchen facilities. The value of the meals is reported as a taxable benefit.

CRA indicated that the s. 67.1(2)(a) was not available assuming "that the Company is not in the business of providing food or beverages to paying customers." However, the exception in s. 67.1(2)(d) applied.•

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(d) "paying customers" required 79

22 October 2012 External T.I. 2012-0452491E5 F - Repas fournis dans le cadre d'une formation

Pink Elephant followed/potential exception for training business where it breaks out meals on its invoices

As part of the carrying on of its training business, the taxpayer provides breakfast and dinner, as well as a coffee break. CRA first noted:

In Pink Elephant, the TCC determined that the exception in paragraph 67.1(2)(a) was applicable to the catering service expenses incurred by a company that provided training to the public in information technology in the course of carrying on its business, whether or not the provision of meals represented a minor or a significant part of the ordinary course of business. … [T]he CRA would be inclined, in situations similar to those described in the judgment, to accord tax treatment similar to that provided by the TCC in its judgment.

Turning to the potential application of the s. 67.1(2)(a) exception to the taxpayer itself, CRA stated:

[I]f the taxpayer provides meals in the normal course of the taxpayer’s business to participants as part of training sessions, and the cost of meals is included in the accounts invoiced to participants, we are of the view that subsection 67.1(1) may not apply to the taxpayer, given the exception provided in paragraph 67.1(2)(a).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(1) trainees required to break out meal portion of their invoices even if not separately identified 77
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Know-How and Training training expenses deductible (subject to s. 67.1(1)) provided that no new skill or qualification is acquired 132
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(h) deductibility of meal portion of training charges may be denied under s. 18(1)(h) 100

16 May 1994 External T.I. 5-940798 -

"Since the ordinary course of business of taverns is presumably to carry on a business of providing beverages for a compensation or an expectation of a compensation, it is our opinion that subsection 67.1(1) of the Act would not apply to restrict the amount deductible in respect of free beverages (e.g., free round of drinks) provided occasionally by taverns to their customers."

23 June 1992 T.I. 921136 (December 1992 Access Letter, p. 16, ¶C56-205)

The limitation in s. 67.1 generally would apply to expenditures of a radio broadcasting business on obtaining concert tickets or food or entertainment vouchers for promotional purposes.

2 July 1991 T.I. (Tax Window, No. 5, p. 1)

A person in the business of providing dance instruction in conjunction with organized tours is not exempt under s. 67.1(2)(a) because the meals and entertainment are secondary to the other services provided.

Paragraph 67.1(2)(c)

See Also

Kelowna Flightcraft Air Charter Ltd. v. The Queen, 2003 DTC 611, 2003 TCC 347

The taxpayer, which chartered out its aircraft to customers, paid the crew a per diem meal allowance. The meal allowance was deductible in full to the taxpayer given that it recovered the amount of the allowance from its customers (it being sufficient that the customers were billed in a lump sum without detailed particulars) (s.67.1(2)(c)) and given that the taxpayer's aircraft were "places of business" (s.67.2(e)).

Paragraph 67.1(2)(d)

Administrative Policy

18 December 2013 Internal T.I. 2012-0472211I7 F - Voyages offerts par une compagnie

Caribbean sales incentive trip provided to incorporated sales reps excluded if s. 6(1)(a) benefit to them qua employee

The corporate "Taxpayer" annually offers an annual free trip to a southern location (perhaps a Caribbean resort) to its associated brokers and agents ("Sellers") who have attained specified sales objectives. Most of the Sellers' services are provided through a personal corporation, with the balance being proprietorships.

Respecting the deductibility to the Taxpayer of costs incurred respecting Sellers who provided their services through corporations, CRA stated (TaxInterpretations translation):

[If] they are considered to have received a benefit in respect of, in the course of, or by virtue of their office or employment…the value of such benefit must be included in the computation of their income by virtue of paragraph 6(1)(a) even if the trip is paid for by a person other than their employer. …[If so] paragraph 67.1(2)(d) would ensure that the Taxpayer is not subject to the 50% rule… .

The exclusion in s. 67.1(2)(d) also would apply if the trips represented entertainment the value of which was a taxable benefit to Sellers who were employees of the Taxpayer.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) Caribbean sales incentive trip provided to incorporated sales reps represents a benefit to them from their corporation 382
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(4) - Paragraph 67.1(4)(b) Caribbean sales incentive trip is "entertainment" 171
Tax Topics - Income Tax Act - Section 9 - Nature of Income Caribbean sales incentive trip provided to incorporated sales reps was s. 9 income to their corp to extent of personal portion 167

4 March 2014 External T.I. 2014-0519051E5 - Meals and Entertainment Expenses

"paying customers" required

The Company is required to provide meals (i.e., hot meals, beverages, snacks, fruit etc.) to employees during certain events (not described), and hires chefs/cooks to prepare meals using rented or temporary kitchen facilities. The value of the meals is reported as a taxable benefit.

CRA indicated that the s. 67.1(2)(a) was not available assuming "that the Company is not in the business of providing food or beverages to paying customers." However, the exception in s. 67.1(2)(d) applied.•

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(a) "paying customers" required 79

18 January 1996 External T.I. 5-950297 -

Meal reimbursements and allowances paid to employees who are transport drivers would generally be subject to s. 67.1(1) by virtue of not being included within the exception in s. 67.1(2)(d).

17 February 1995 T.I. 950449 (C.T.O. "Meal Expense Reduction")

General discussion of the relationship between s. 67.1(2)(d) and s. 6(6).

Paragraph 67.1(2)(e)

See Also

Racco Industrial Roofing Ltd. v. The Queen, 97 DTC 331 (TCC)

The Minister was unsuccessful in an argument that reasonable per diem meal allowances paid by the taxpayer to its employees did not qualify for exemption under s. 67.1(2)(e). The use of the word "for" in that provision did not require the employer to purchase the food and beverages directly. Furthermore, the legislative drafter did not intend the rule in s. 67.1 to apply to mandatory expenses (in this case, by a collective agreement).

Administrative Policy

17 September 1996 Memorandum 961800 (C.T.O. "Allowances v. Meals")

Allowances for board and lodging that are exempted from tax in the hands of an employee working at a special work site under s. 6(6)(a)(i) are not exempted by s. 67.1(2)(e).

11 December 1995 Memorandum 951868 (C.T.O. "Meals and Beverage")

The 'place of business' refers to the location where these employees are considered to be employed, i.e., the employee's normal place of employment and not where the food is being served or at a temporary work location albeit a place of business of the employer ... . In the case of professional athletes such as baseball or hockey players, in our view, they would be considered to be employed at the home office of the Club rather than being employed at each and every facility in which they play. Similarly, in the case of actors or film producing employees, each and every filming site may be a place of business but not necessarily the place to which these individuals are considered to be employed."

16 February 1995 Memorandum 950160 (C.T.O. "Meal Allowance Reduction")

The practice in the film and television industry of feeding actors and crew during filming would give rise to a taxable benefit to them under s. 6(1)(a), with the result that the exemption in s. 67.1(2)(e) would apply.

8 August 1994 External T.I. 5-941052 -

The place where an event is held, such as conference facilities, do not constitute a "particular place of business" for purposes of s. 67.1(2)(e). A particular place of business refers to a place where the business of the employer is regularly conducted.

19 January 1994 T.I. 931959 (C.T.O. "Restaurant Meals")

A site which qualifies as a "special work site" for purposes of s. 6(6) should also qualify as a "particular place of business". RC will require the employer to provide the food or make the arrangements for the food to be available unless extenuating circumstances cause RC to look through the transaction to the ultimate payor. Examples of extenuating circumstances are where the location of the particular place of business or a lack of catering facilities prevent the employer from directly providing the food or making arrangements for the food to be made available. The number of employees involved is not considered to be an extenuating circumstance.

17 July 1991 T.I. (Tax Window, No. 6, p. 12, ¶1355)

The longer the time required to complete a contract at customers' premises located outside the municipality where the employer's head office is located, the greater the likelihood that the customers' premises will qualify as a "particular place of business".

18 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 20, ¶1096)

Where the location or lack of catering facilities prevents the employer from directly providing the food, the employees can provide their own food and be reimbursed by the employer, without loss of the s. 67.1(2)(e) exception.

Subsection 67.1(4) - Interpretation

Paragraph 67.1(4)(a)

Administrative Policy

23 September 1996 Memorandum 961978 (C.T.O. "Food Served by Airlines")

The exemption in ss.67.1(4) and 67.1(2)(a) would cover the cost of food and beverages served by an airline prior to boarding, and between stops when changing planes, either in the boarding area of the terminal or in an airline-owned lounge for first-class or business-class passengers.

Paragraph 67.1(4)(b)

Administrative Policy

18 December 2013 Internal T.I. 2012-0472211I7 F - Voyages offerts par une compagnie

Caribbean sales incentive trip is "entertainment"

The corporate "Taxpayer" annually offers an annual free trip to a southern location (perhaps a Caribbean resort) to its associated brokers and agents ("Sellers") who have attained specified sales objectives. The qualifying Sellers ("Travellers") must attend some morning briefings on the Taxpayer's products, with the same sessions being offered in Canada to the balance of the Sellers. Group dinners also are organized. Spouses are invited but do not attend the briefings (unless they also are Sellers). The balance of the time at the resort is free time or spent on organized tours, shopping expeditions, golfing or volleyball events or cocktail parties. Most of the Seller services are provided through a personal corporation, with the balance being proprietorships.

Respecting the deductibility to the Taxpayer of costs incurred respecting non-incorporated Sellers, CRA noted that such expenses (which otherwise qualify for full deduction without limitation by s. 18(1)(a)), are subject to the 50% limitation in s. 67.1(1), stating (TaxInterpretations translation) that "the expenses for the trip offered to the Travelers constitute ‘entertainment' for purposes of section 67.1."

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) Caribbean sales incentive trip provided to incorporated sales reps represents a benefit to them from their corporation 382
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(2) - Paragraph 67.1(2)(d) Caribbean sales incentive trip provided to incorporated sales reps excluded if s. 6(1)(a) benefit to them qua employee 168
Tax Topics - Income Tax Act - Section 9 - Nature of Income Caribbean sales incentive trip provided to incorporated sales reps was s. 9 income to their corp to extent of personal portion 167

Subsection 67.1(5) - Definitions

Long-haul truck

Administrative Policy

3 June 2014 External T.I. 2014-0518911E5 F - Grand routier / long-haul truck

weight reference is to loaded weight determined by manufacturer

Does the gross vehicle weight rating refer to the loaded capacity and does it include the weight of a trailer? CRA stated (TaxInterpretations translation):

The gross vehicle weight rating is determined by the manufacturer. Usually, the manufacturer inscribes this information on a sticker affixed to the interior door frame of the cab on the driver's side.

The definition of "long haul truck" contemplates only a truck or tractor. Any trailer attached to the truck or tractor is not included in the definition of "long haul truck".