Entertainment Expense

In principle, entertainment expenses are not deductible for Japanese tax purposes.  That said, with regard to expenses for eating and drinking, company may deduct such expenses as far as the expense does not exceed JPY 5,000 per person (excluding expenditures for internal purposes). 

In addition, Small or Medium sized Enterprise (“SME”) can deduct 50% of the eating and drinking that exceeds JPY 5,000 per person (excluding expenditures for internal eating and drinking) .

Certain proof (date of eat and drink, name of participant, relationship, number of participant, name of restaurant, location of restaurant and amount of cost) are needed to be reserved.

SME can also choose to take a tax deduction up to the smaller of the actual disbursement for the entertainment expense or JPY 8 million, instead of 50% deduction above.  

SME is a corporation whose share capital is JPY 100 million or less. Even where the share capital is JPY 100 million or less, a corporation is not qualified for SME if 100% owned directly or indirectly by a corporation of which share capital is JPY 500 million or more.