Are Company Drink Outings Tax-Deductible? An Overview of Japanese Tax Laws

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Hi, my name is Taisei Koshida, and I am a certified public accountant and tax accountant.

I aim to assist non-Japanese business owners who struggle with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.

This blog may help if you are unclear about the differences between entertainment expenses and welfare expenses for employees in Japan.

Points to Consider Regarding Tax Audits

Distinguishing between entertainment expenses and welfare expenses for employees is crucial. If classified as entertainment expenses, amounts exceeding 8,000,000 yen are not deductible for typical small businesses. However, if annual entertainment expenses are well below 8,000,000 yen, this distinction may not be as significant. On the other hand, individual proprietors face no such restriction.

Including All Employees or Not

When a business meal includes every employee, it’s classified as welfare expenses for employees. However, if it’s just for select directors and employees, it falls under entertainment expenses.

Is the Amount Socially Reasonable?

Even if all employees are included, if the cost per person is excessively high (like 50,000 yen) compared to general standards, it’s treated as entertainment expenses by Japanese tax laws. A per-person cost of around 10,000 yen might be the limit to qualify as welfare expenses.

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