You can get the most of your deductible of entertainment expenses by knowing what the laws and rulings are.
A company incurred on the following entertainment expenses are allow full deduction:-
1. Entertainment to employees. Examples of such entertainment expenses are expenses on free meals and refreshment, annual dinners, outings, family day or club membership for employees.
2. Entertainment for payment in the ordinary course of business. Example : Providing cultural shows by restaurants or hotels at their premises to entertain their customers.
3. Promotional gifts at trade fairs or trade or industrial exhibitions outside Malaysia. Example : Expenditure incurred on samples of products of the business, small souvenirs, bags, and travel tickets provided as gifts to customers or visitors at the trade fairs or trade exhibitions or industrial exhibitions held outside Malaysia.
4. Promotional samples of products of the business. Examples of such entertainment expense are free samples of products of the business given to schools or for certain other functions.
5. Entertainment for cultural or sporting events open to members of the public wholly to promote the business. Example : Cultural event – Cost of passage, accommodation, food and drink for the artistes. Sport event – Sponsorship for food, drink, sports attire and sports equipment for sportsmen.
6. Promotional gifts within Malaysia of articles incorporating the logo of the business.
7. Entertainment related wholly to sales arising from the business.
EXAMPLES OF ENTERTAINMENT EXPENSES:
Accounting & tax tips:-
1. Create 3 accounting code for entertainment expenses in your chart of accounts i.e.
a ) Entertainment expenses (100%)
b ) Entertainment expenses (50%)
c) Entertainment expenses (Non deductible)
(This is to facilitate year end tax computation purpose)
2. When attend customer's annual dinner should sponsor gift (50% allowed) instead of cash contribution (non deductible)
3. Contribution for customer open new shop congratulation advertisement should classify as advertisement account (100% allowed) instead of donation & contribution account (Non deductible)