In principal, entertainment expenses are not deductible under the Japanese tax law. However, there are several exceptions.

What is entertainment expenses? For example, expenses for drinking and eating, gift, golf, party, condolence, etc., are entertainment expenses.

Today I will talk about two important rules:

1. 5,000 yen rule for drinking and eating
2. Allowance for a small and medium-sized company

1. 5,000 yen rule for drinking and eating

(a) 5,000 rules for drinking and eating

If the amount of expense for drinking and eating is 5,000 yen or less per person and below conditions 2 & 3 are satisfied, the expenses are treated as deductible expenses

Even if the amount of expense is exceeding 5,000 yen, 50% of the expenses are treated as deductible expenses when the conditions (a) & (b) are satisfied.

(b). Drinking and eating must be with business related person outside your company, such as customers and suppliers.

Expenses for internal drinking and eating are not deductible. Also, drinking and eating with your family are not treated as deductible expenses.

(c). Keep the record of following:
Name of participants
Number of participants
Name of restaurants

If these records are not kept, the expenses are not deductible.

2. Allowance for a Small and Medium-sized company

For a company whose capital amount is equal to or less than 10 million yen, entertainment expenses are deductible up to 8 million yen per year.

By the way, ordinary costs to serve drinks and foods for the meeting are not treated as entertainment expenses, thus 100% deductible. For example, coffee, bottled water, refreshments for the meeting are deductible expenses.