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Is the input tax deductible from entertainment expenses?

January 16, 2022 | 30,00 EUR | answered by Roberta Schlattmann

Dear tax advisor,

I have a question regarding input tax from entertainment expenses. In my company, entertainment expenses occur regularly when I invite business partners for meals or hold meetings in restaurants. Now I wonder if I can deduct the input tax from these entertainment expenses.

Currently, I am unsure whether these costs are actually deductible, as I have heard that there are some restrictions. I want to ensure that I am handling my taxes correctly and not making any mistakes that could lead to additional payments or other unpleasant consequences.

Could you please explain to me if and to what extent the input tax from entertainment expenses is deductible? Are there specific requirements that need to be met in order for me to claim the input tax? And if not, are there alternative ways to optimize the tax implications of entertainment expenses?

I would be very grateful if you could assist me with this, so that I can lead my company in a tax-efficient manner.

Best regards,
Jürgen Hinze

Roberta Schlattmann

Dear Mr. Hinze,

Thank you for your question regarding input tax on entertainment expenses. It is understandable that you are unsure whether these costs are deductible and what regulations need to be considered. I am happy to help clarify this issue for you.

In principle, it is possible to deduct input tax on entertainment expenses, but there are some limitations that need to be taken into account. According to § 15 Abs. 1a UStG, entertainment expenses can generally only be deducted as operating expenses at a rate of 70%. This means that only 70% of the input tax on these costs can be claimed as input tax.

However, there are certain conditions that must be met in order for the input tax on entertainment expenses to be deductible. Firstly, the entertainment expenses must be business-related, meaning they must be related to the entrepreneurial activity. Secondly, the costs must be reasonable, meaning they must not be excessively high. Additionally, the entertainment expenses must be properly documented, for example, with receipts and a detailed description of the occasion.

If the entertainment expenses are not deductible or if you want to optimize the tax implications, there are alternative options. For example, you can try to allocate the costs to other operating expenses that are fully deductible. Also, in some cases, treating the entertainment expenses as non-deductible operating expenses and instead recording them as withdrawals may be a sensible option.

I hope that this information has been helpful to you. If you have any further questions or would like a more detailed consultation, I am happy to assist. Feel free to reach out to my online office hours or schedule a personal appointment.

Best regards,
Roberta Schlattmann