1.Entertatinment expense
As you run your business, you may occasionally treat your clients to luch , dinner, or some gift. and we can account for these costs are "entertainment expense" on your income statement.
The rule for VAT deduction is, if you spend money for your business and obtain a tax invoice, cash receipt, or use a credit card(qualified receipt), your can deduct amount of VAT of your purchase receipt.
While have a meal with your clients may be directly related to your business, it is not deductible according to VAT tax law.
This is because entertainment expense are typically paid for in places such as restaurant, department stores, or bars - places where people can hang out with friends or family. For the National Tax service(NTS), it cab be challenging to determine whether your payment in this place is related to your business or if it's a private expenditure. As a result, they have decided to make it a non- deductible item on VAT tax filing.
Fortunately, even if it's not VAT deductible, you can still deduct it on your income tax filing.
2.If you are an individual business with no emloyees yet.
if your business is being run solely by your self, withour ant employees, than your meal expenditure should be accounted as ‘entertainment expenst’ rather than ’welfare expense’. 'Welfare expenses' can only be claimed when you hire employees and pay for their welfare
In conclusion,even if you have a qualified receipt(such as a tax invoice, cash receipt, or credit card receipt), meals are not VAT deductible. However, it is still possible to deduct them on your income tax return.
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