Company Drinking Parties in Japan: Entertainment Expenses or Welfare Expenses?

“A cheerful look makes a dish a feast.” ― Aurelius Prudentius Clemens

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.

What Should Be Considered During a Tax Audit?

The distinction between entertainment expenses and employee welfare expenses can be important.

If a company drinking party is treated as entertainment expenses, the deductible amount may be limited for corporate tax purposes. On the other hand, if it is treated as employee welfare expenses, it may generally be deductible as a business expense.

However, the actual tax treatment depends on the facts and circumstances of each case.

Were All Employees Invited?

If a company drinking party is open to all employees, it is generally more likely to be treated as employee welfare expenses.

For example, year-end parties or company-wide social gatherings that all employees are invited to attend are often treated as welfare expenses.

However, if only directors, selected employees, or specific business partners attend, the expense may instead be treated as entertainment expenses.

Is the Amount Socially Reasonable?

Even if all employees are invited, the amount must still be socially reasonable.

For example, if the cost is extremely high, such as 50,000 yen per person, the tax office may question whether the expense should really be treated as employee welfare expenses.

In practice, a moderate amount is generally easier to justify. A cost of around 10,000 yen per person may be considered reasonable, depending on the circumstances.

In My Experience

In my experience, company drinking parties are one of the expenses that tax auditors frequently review.

Keeping records of the date, participants, purpose of the event, and the amount paid can make it much easier to explain the business purpose during a tax audit.

Our accounting firm regularly assists foreign business owners with bookkeeping, tax filings, and tax planning in Japan.

If you have questions about entertainment expenses, employee welfare expenses, or other deductible business expenses in Japan, please feel free to contact us through the inquiry form.

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