1. Introduction
With the intention of resolving a discrepancy with the increasing amount of business expenses due to the ongoing price-hikes among all goods and services, the amount of food and drink expenses excluded from the scope of entertainment expenses has been revised in the 2024 Tax Reform. In this News, we will mention the contents of revisions and points to note for the new standard.
2. Treatment of entertainment expenses
Entertainment expenses include entertainment expenses, reception expenses, secret expenses, and other similar expenses which are disbursed by a company to entertain or comfort its customers or suppliers, or to send gifts to them. However, the following are excluded from the scope of entertainment expenses for tax purposes.
① Expenses related to sports festivals, theatrical entertainment and travel expenses for the benefit of employees
② Food and drink expenses of JPY 5,000 yen or less per person, satisfying the requirement of retaining certain relevant documents (before amendment)
③ Small gifts such as calendars, pocket notebooks, fans, towels, and other similar goods
④ Lunch boxes and drinks served at a meeting
⑤ Expenses for a round table talk for editing publications of newspaper and magazines, collecting news materials for broadcasting, and gathering news stories
Under Japanese Corporation Tax Law, entertainment expenses are not deductible as expenses in principle. However, certain tax breaks are allowed, depending on the size of the company.
3. Tax reform for 2024 (after amendment)
Under the 2024 Tax Reform, the standard amount of food and drink expenses mentioned in the above 2② has been increased to JPY 10,000 per person.
4. Points to note
In line with the revision of the above food and drink expenses, the following measures should be taken by companies.
① Explain the new standard and obligations to retain certain records
② Review the internal rules for reporting food and drink expenses to the accounting department or other related divisions
③ In case companies use the entertainment expense management system, consider setting up new functions or changing the current functions for the new standard
5, Conclusion
In this News, we mentioned the revision of food and drink expenses excluded from the scope of entertainment expenses in the 2024 Tax Reform.
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(Reference / in Japanese)
National Tax Agency
No.5265 Entertainment Expenses and Calculation of Non-deductible Expenses
Ministry of Finance
Tax Reform for 2024 issued in March 2024
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