Client Function Deductibility

The entertainment limitation rule applies to deductions for expenditure on food and drink that a business provides off their business premises. The limitation rule extends to any incidental expenditure on matters such as hireage of crockery, glassware or utensils, waiting staff, and music or other entertainment provided in association within the specified kind of entertainment.

There are some exclusions from the limitation rule when the entertainment expenditure is incurred in promoting the business, goods or services of the provider of the entertainment. However, these exclusions have limited application, in particular, these exclusions generally require the event to be open to the public or for existing business contacts not to have a greater opportunity to enjoy the entertainment than the public generally.

So if a company hosts a formal evening for 80 of its key customers, hosting the evening off its business premises and involves pre-dinner drinks, dinner and music, the expenditure on the event will come within the entertainment limitation and only be 50% deductible.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

Posted: Thu 11 Jun 2015

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