Case 16<\/p>\n
<Question>
\nI often have lunch meetings with my clients and have drinks with them. Also, I am a member of the Canadian Chamber of Commerce in Japan so I sometimes join business parties held by the Chamber of Commerce. Regarding these expenses, is everything treated as an entertainment expense? Also, please give me any relative information regarding typical entertainment expenses.<\/p>\n
<Answer>
\nEntertainment expenses include ordinary entertainment items, plus the cost of receptions, secret expenses and gifts to customers, etc.
\nThe nature and magnitude of the amount expended by corporations in Japan for entertainment has become a social issue, also it makes it possible to transfer income from the corporation to the owner of the corporation; therefore, the tax authority puts restrictions on\u00a0the recording of entertainment expenses.<\/p>\n
<\/p>\n
Entertainment expenses deduction<\/span><\/strong><\/p>\n 1.\u00a0\u00a0\u00a0 Capital exceeding JPY 100 million 2.\u00a0\u00a0\u00a0 Capital\u00a0not exceeding JPY 100 million Smaller amount of either (a) or (b)\u00a0is deductible.<\/p>\n Note: Under Income Tax, various forms of entertainment are included within the scope of the entertainment expense. As long as it is considered as an entertainment expense it is deductible.<\/p>\n <\/p>\n Items excluded from entertainment expenses<\/span><\/strong><\/p>\n The following are examples of items excluded from entertainment expenses, but a sensitive judgment is necessary when excluding or including these\u00a0expenses.<\/p>\n <\/p>\n Q&A case<\/span><\/strong><\/p>\n 1.\u00a0\u00a0\u00a0 Lunch meeting<\/p>\n As mentioned\u3000above, refreshments and luncheons at conferences are excluded from the entertainment expense though please note that it should be a commonly accepted amount (even if it was\u00a0over JPY 5,000, as long as it was considered commonly accepted it would be admitted).<\/p>\n 2.\u00a0\u00a0\u00a0 Drinks with clients<\/p>\n As mentioned\u00a0above, under some requirements, it is excluded from the entertainment expense. The points are that it should 1) be less than JPY 5,000 per participant 2) clarify the purpose, who with (generally it should be with customers). Also, the following points should be considered;<\/p>\n (1)\u00a0\u00a0\u00a0 In the case of entertaining a customer while drinking, if entertaining one customer is considered to be merely a formality it cannot be excluded from the entertainment expense. as it is less than JPY 5,000 it is excluded from the entertainment expense. However if the second party is considered as a continuation of the first party, it cannot be excluded from the entertainment expense. For example, the first party is held at a bar, and the second party is held at the restaurant of the bar.<\/p>\n 3.\u00a0\u00a0\u00a0 Chamber of Commerce Party<\/p>\n If the party held by the Canadian Chamber of Commerce (not seminar, workshop or training) is fundamentally related to business\u00a0it is considered as an entertainment expense. If not, it is considered as part of the salaries or bonuses of the people who join the party. Also, the membership expense of the chamber of commerce is excluded from the entertainment expense. 4.\u00a0\u00a0\u00a0 Others<\/p>\n <\/p>\n <\/p>\n By Certified Public Accountant (CPA) & Tax accountant, Koji Takahashi,<\/em> <\/p>\n","protected":false},"excerpt":{"rendered":" Case 16 <Question> I often have lunch meetings with my clients and have drinks with them. Also, I am a member of the Canadian Chamber of Commerce in Japan so…<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38],"tags":[],"class_list":{"0":"post-684","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-news-2"},"_links":{"self":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/684","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/comments?post=684"}],"version-history":[{"count":1,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/684\/revisions"}],"predecessor-version":[{"id":6932,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/posts\/684\/revisions\/6932"}],"wp:attachment":[{"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/media?parent=684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/categories?post=684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tkpartners.or.jp\/en\/wp-json\/wp\/v2\/tags?post=684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nNot deductable.<\/p>\n
\n(a)\u00a0\u00a0 Expended entertainment expenses \u00d7 90\uff05
\n(b)\u00a0 JPY 4 million \u00d7 90%<\/p>\n\n
\n(2)\u00a0\u00a0\u00a0 Regarding the second party, it is judged to be different to the first party basically, so as long<\/p>\n
\nConversely, the membership fee of a Rotary Club, Golf Club, or Leisure Club is considered as an entertainment expense (if it is not associated with other businesses, it is considered as \u00a0 \u00a0part of the salary or yearly bonus).<\/p>\n\n
\nAs long as every employee and officer participates in the party, it is considered as a welfare expense. If only a portion of the staff attended (such as officers only) it would be treated as salaries on condition that it is not related to business. If customers are invited, their expenses are included in the entertainment expense.<\/li>\n
\nBasically, it is included in the entertainment expense. If it is paid to employees or officers, it might be considered as a welfare expense as long as it is a commonly accepted amount.<\/li>\n<\/ul>\n
\nTokyo & Yokohama<\/em><\/p>\n