Majority of entertainment expenses may be considered deductible for most countries but in Japan, it is limited. The tax code has been put in place to regulate companies claiming entertainment expenses which in reality are personal expense of individuals made on company accounts. In general, entertainment expenses are not considered deductible unless you are corporation with small capital amount. Therefore, careful decision making needs to be made on what expenses are entertainment or not. This is one of the favorite topics for tax auditors during tax audit so the company should be well prepared. In principle, entertainment expense is decided on the following 3 elements.
- Expense made to business related partners
- Expense made for anticipating future business
- Expense made on non-business setting
Checks your books closely with your tax accountant to see if any of the transactions in the following general ledgers can be considered as entertainment or not.