The entertainment expenses are a business routine expenses, the main objective would be to promote the sales provided to customers, dealers and distributors, but excluding the supplier. The scope of entertainment including the provision of food, drink, recreation, accommodation or travel.
100% Deduction
A) Entertainment to employees
If the company provides the food, drink and recreation to employee such expenses are wholly deductible. An example : the staff refreshment, annual dinners, family outings.
B) The ordinary course of business
If the business provides an entertainment as part of their service, therefore it will entitle to deduct from income tax. An example:
1) The cultural shows provided by the restaurant and hotels for the customer, and
2) The meals provided by an airline or other transportation company.
Therefore, the entertainment is wholly deductible.
C) The promotional gifts at the trade fair
The promotional gifts, distribute during the trade or industrial exhibitions held oversea for the objective to promoting export market from Malaysia.
The promotional gifts included company samples of products, small souvenirs to visitors at the trade fair held outside Malaysia.
D) Promotional sample of the product
The distribution of sample of the product for the purpose of advertising. An example of the sample for the customer to try at the supermarket. The promotional gifts shall incorporate the logo of the business.
E) Cultural and sport activities
The entertainment expenses such as foods, accommodation, sport equipment for the artists or the sportsman during cultural and sporting events which are open to public. If the performance of music or dance as part of the event will not entitled to deduct.
F) Leave passages
If the employer provides the benefit of leave passage to him, her employee or the immediate family members of the employees a yearly event within Malaysia, will be entitle for deduction.
Example : the travelling expenses for the family trip is deductible.
G) Arise wholly to sales
If the expenses incurred wholly related to sales, then such as entertainment expenses will be deductible.
An example, if the refreshment offer during the launching of products, the redemption of gifts or the cash discount voucher or movie ticket.
50% deduction
If the entertainment expenditure is wholly and exclusively incurred in the production of income, however such entertainment is not allowed under the provisions of prohibition expenses, it will only deduct half of the expenses.
An example : A gift hampers or a gift of flowers to its customer will only deduct 50% of the total entertainment expenses.
100% no deduction
On the other hand, if the entertainment expenditure is not a wholly and exclusively incurred in the production of income, it will not allow deducted
An example : the wedding gift is an entertainment expense, but does not allow for tax deduction.
Conclusion :
Understanding the entertainment very importance, the tax treatment guides us how to minimise the tax liability in the year of assessment.
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