Scope of entertainment expenses and the non-deductible amount: treatment of food and drink costs of JPY 10,000 or less per personHow much of a company's "treat" money can count as an expense?
Entertainment expenses are in principle not deductible, but small and medium-sized corporations with year-end capital of JPY 100,000,000 or less may choose to treat as non-deductible either the part exceeding 50% of food and drink costs or the part exceeding JPY 8,000,000 a year. Food and drink costs of JPY 10,000 or less per person are excluded from entertainment expenses if the required records are kept.
- ○Applies: Dinner with a client (JPY 8,000 per person, required records kept)
- ○Applies: Low-cost promotional gifts such as calendars with the company name
- ○Applies: Usual amusement costs such as employee sports days and trips
- ×Does not apply: Dinner for officers and employees only (even at JPY 5,000 per person)
- ×Does not apply: JPY 10,000 or less per person, but the required records are missing
Key points
- Entertainment expenses: spending on entertaining, hosting, amusing or giving gifts to business associates such as customers and suppliers (regardless of what it is called).
- Food and drink costs of JPY 10,000 or less per person are excluded from entertainment expenses (JPY 5,000 or less for spending on or before March 31, 2024). Costs for entertaining only officers, employees or their relatives are not covered.
- To apply the exclusion, you must keep a record stating the date, the names and relationships of participants, the number of people, the amount, and the name and address of the restaurant.
- Small and medium-sized corporations and the like: either the part exceeding 50% of food and drink costs, or the part exceeding JPY 8,000,000 x the number of months in the business year / 12.
- For corporations with year-end capital over JPY 10,000,000,000, the full amount is non-deductible.
What to do in practice
- When you have a business meal, record and keep the five items (date, participants, number of people, amount and restaurant name, and other details) together with the receipt.
- At closing, estimate which is more favorable, the 50% method or the JPY 8,000,000 method, and choose it.
When a company invites business partners to a meal, that money is called "entertainment expenses," and it is usually hard to have it accepted as an expense. But if the meal costs JPY 10,000 or less per person and you keep a record of when it was and who went, it can be treated separately from entertainment expenses. The record is what matters.
Points
- A meal of JPY 10,000 or less per person is left out of entertainment expenses if there is a record.
- A meal with only the company's own people does not belong in this group.
- Until March 2024, this line was JPY 5,000 per person.
What the words mean
- Entertainment expenses (交際費)
- Money spent to host business partners or give them gifts
- Non-deductible (損金不算入)
- Not counted as an expense, so it cannot be subtracted in calculating taxes
- National Tax Agency (NTA): NTA: No. 5265 Scope of entertainment expenses and calculation of the non-deductible amount
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.