David Rotfleisch on If the CRA Would Accept a $3.2M Bluefin Tuna as a “Promotional Expense?” & Canadian Tax Implications

On January 5, 2026, international attention turned to Tokyo’s Toyosu Market when Kiyoshi Kimura—widely known as the “Tuna King” and the head of the Sushi Zanmai restaurant group—secured a record-setting purchase. Kimura successfully bid 510.3 million yen, roughly $3.2 million CAD, for a 243-kilogram (535-pound) bluefin tuna, marking one of the most expensive tuna sales in history.

Viewed purely from a commercial standpoint, the transaction was remarkable. The acquisition cost worked out to approximately $6,060 per pound. Yet the tuna was subsequently served across Sushi Zanmai locations as sushi and sashimi at regular menu prices, typically between 128 and 398 yen per piece (about $1.15 to $3.60 CAD).

This strategy reflects a classic “loss leader” approach, where an outsized expenditure is incurred to generate publicity and brand exposure rather than direct profit.

If a Canadian business undertook a comparable promotional strategy, it would prompt careful scrutiny under Canadian tax law—most notably whether the Canada Revenue Agency (CRA) would permit the deduction of such an exceptional expense as incurred for the purpose of earning income.

Tax Deductibility of the Promotional Expense

Under Canadian income tax principles, businesses are generally entitled to deduct expenses that are reasonably incurred for the purpose of generating income. The key constraint on this entitlement is the “reasonableness” requirement set out in section 67 of the Income Tax Act (ITA).

Section 67 authorizes the CRA to deny all or part of a claimed deduction where the amount of the expense is excessive in light of the surrounding circumstances. Although the tax authorities do not second-guess business decisions simply because they turn out to be unprofitable, an expense may be considered unreasonable where the amount paid is so disproportionate that no prudent business person would have agreed to it.

Applying to the record-setting tuna purchase:

• Business Purpose: The expenditure is best characterized as a marketing and promotional outlay rather than a simple inventory cost. In Canada, advertising and promotional expenses are generally fully deductible when incurred to earn business income.
• Reasonableness: The purchase price vastly exceeds the tuna’s fair market value, with the premium effectively representing the cost of global media exposure. The CRA could take the position that only the portion of the expense aligned with ordinary advertising costs or the fish’s market value should be deductible. That said, the transaction generated extraordinary worldwide publicity, supporting the argument that the full amount qualifies as a bona fide—if unconventional—advertising expense. The enhanced brand visibility and reputational value associated with the “Tuna King” label provide a tangible commercial benefit that bolsters the reasonableness of the expenditure.
• Loss-Leader Strategy: By offering the tuna at standard menu prices, typically under $4.00 CAD per serving, the business knowingly absorbs a substantial loss on the item itself. However, this strategy is commercially defensible when viewed in context: the heightened customer traffic and increased sales of higher-margin products across the chain reinforce the income-earning purpose of the initial expenditure and support the case for full deductibility.

GST/HST Treatment and Implications

For Canadian Goods and Services Tax / Harmonized Sales Tax (GST/HST) purposes, the restaurant would be required to register as a GST/HST registrant. The sales tax analysis unfolds in two separate phases.

Stage 1: Acquisition of the Whole Tuna (Wholesale Level)

The purchase of a whole, unprocessed tuna from a fisher or wholesale supplier generally qualifies as a basic grocery. Under the Excise Tax Act, basic groceries are zero-rated, meaning they are taxable at a rate of 0%. As a result, GST/HST is typically not payable on the purchase of the raw fish itself.

Even so, as a registered person, the restaurant would be entitled to claim Input Tax Credits (ITCs) for any GST/HST incurred on related taxable inputs, such as international freight charges, specialized cold-storage services, or professional fees associated with marketing and promotion.

Stage 2: Sale of Prepared Sushi (Retail Level)

Once the raw tuna is prepared and sold as sushi within a dining establishment, the GST/HST treatment changes.

• Taxable Supply: Food and beverages supplied by an eating establishment are generally considered taxable supplies. Accordingly, customers would be charged the applicable GST/HST rate (for example, 13% in Ontario) on the retail price of each sushi item.
• Establishment Threshold: Because substantially all—generally 90% or more—of a sushi restaurant’s sales are made in taxable form, the business is required to collect and remit GST/HST on those sales in the ordinary course.

Distinguishing from Meals and Entertainment Expenses

It is important to differentiate this extraordinary promotional outlay from the 50% limitation that applies to meals and entertainment expenses. Since the main purpose and effect of the expense is widespread advertising and public promotion, the full amount should be treated as an advertising expense rather than a client entertainment cost. This classification supports claiming the entire cost as a deductible business expense under the Income Tax Act.

Tax Pro Tips

• Keep Detailed Records: Document the purchase thoroughly, including associated media coverage and exposure metrics. To support the deduction, you must show that the premium paid was a deliberate strategy to enhance brand visibility and drive long-term business growth.
• Advertising vs. Meals & Entertainment: Clearly separate high-value promotional expenses from client meals and entertainment, which are generally subject to the 50% deduction limit under the ITA.
• Inventory vs. Promotion: While the base cost of the fish is recorded as cost of goods sold, any amount paid above fair market value for publicity purposes should be tracked separately as a marketing expense to ensure full deductibility.

Frequently Asked Questions (FAQs)

Can the restaurant fully deduct the $3.2 million expense for tax purposes?

Yes. When properly documented as a reasonable advertising expense aimed at generating business income across the restaurant chain, the cost qualifies as a fully deductible operating expense under the Income Tax Act.

Why sell the sushi at regular menu prices when the tuna cost $6,060 per pound?

This is a strategic “loss leader.” The objective is to build goodwill and brand recognition, driving customer traffic and loyalty—benefits that far exceed the upfront expense of the fish.

Is the tuna purchase considered a capital expense?

No. Although the price is exceptionally high, the expense is operational in nature, covering advertising and inventory, and does not constitute a capital asset such as real estate or equipment.

Disclaimer: The information set out in this document is based on tax legislation and administrative interpretations in effect at the time of writing, all of which are subject to change, including on a retroactive basis. Such changes may give rise to additional taxes, interest, or penalties. This material is provided for general informational purposes only and should not be relied upon as legal or tax advice. Readers should seek advice from a qualified tax professional regarding their specific circumstances.