Points to Pay Attention to for Entertainment Expenses Under Japanese Tax law

【Koshida Accounting Firm Column Date:

A man’s friendships are one of the best measures of his worth. - Charles Darwin




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.


If you are unclear about entertainment expenses in Japan, you might find this blog helpful.




What Are Entertainment Expenses?

Entertainment expenses are, for example, food expenses and golf bills, which are expenses incurred to foster relationships with business associates.


The Case for Corporations Such as Joint-Stock Companies

For small businesses with a capital of 100 million yen or less, the limit of entertainment expenses is 8 million yen a year. Any amount exceeding this is not considered an expense for tax purposes. This is not limited to only the entertainment expenses account, including those that essentially possess the nature of entertainment expenses like meeting expenses and fees, all of them are considered entertainment expenses for tax purposes.


The Case for Individual Businesses

For individual businesses, there is no limit on entertainment expenses like there is for corporations. On the other hand, during tax audits, tax officers will suspect that entertainment expenses are not business-related. If the amount of entertainment expenses is high, there is a high possibility of being questioned about meal expenses near your home on weekends.

However, the responsibility to disallow expenses lies with the tax office. Taking into consideration the trouble that tax officers go through, in an actual audit, in many cases, tax officers often encourage taxpayers to voluntarily disallow a certain amount of expenses to settle the audit.



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