Is entertainment expenses tax deductable

FOR income tax purposes, any expenses incurred in the course of a business will only be eligible for tax deduction if the expenses are solely incurred in producing the business income. It is important to establish the deductibility of an expense as in the event of a field audit which results in the Inland Revenue Board (IRB) discovering an understatement of tax due to claims on expenses which are not tax deductible, a taxpayer will not only suffer additional tax but also a 45% penalty. With effect from year of assessment 2004, entertainment expense will only be eligible for 50% tax deduction except for specific circumstances where it will qualify for full deduction. This article will explain the three steps to determine the amount of entertainment expenses allowable as a deduction.

It is important to establish the deductibility of an expense as in the event of a field audit which results in the Inland Revenue Board (IRB) discovering an understatement of tax due to claims on expenses which are not tax deductible, a taxpayer will not only suffer additional tax but also a 45% penalty.