Tax Consulting: How to Properly Use Entertainment Expense Receipts

As a business owner, you’ve likely already encountered the topic of entertainment expense receipts. In the course of business, the occasional business meal with partners, suppliers, or customers is simply part of the job. During a business meal, you can negotiate contracts and discuss projects in a relaxed atmosphere. However, these business restaurant visits do more than just foster stable business relationships. Many of you are aware that entertainment expenses can also be deducted from taxes. The tax office requires a corresponding entertainment receipt for this. To avoid trouble, we advise you as your tax advisor in Düsseldorf and Oberhausen. In this article, you’ll learn what requirements you need to keep in mind.

What counts as a business meal?

Now, it certainly sounds very tempting to claim your next pleasant visit to your favorite restaurant as a tax deduction. For us as tax advisors in Düsseldorf, this idea would be all too appealing as well. But of course, the tax office doesn’t make it quite that simple. The meal is only accepted as a business expense if there is a business-related purpose. This business-related purpose is always present when business partners or clients are invited to dinner. Additionally, a specific business occasion is required. This could be, for example, contract negotiations. It is also important that only individuals involved in the business relationship are present. As soon as an external private individual joins the meal, the business lunch becomes a private meal. Furthermore, the meal must always take place in a restaurant—that is, off-site. A meeting for coffee in the office simply cannot be claimed as a business expense. If you are an employee rather than a business owner, you may be wondering whether you, too, can submit entertainment receipts. The answer is generally “yes.” For example, you could invite your tax advisor to a meal and claim this as a business expense. Here, too, a business-related reason must be documented; while this may seem significantly more difficult for an employee than for a self-employed individual, it is nevertheless possible in principle.

Proof: Entertainment Receipt

If the requirements for a business meal are met, the only thing missing is the correct proof for your tax purposes. The tax office requires the standard entertainment receipt as such proof. As always, it is particularly important for tax purposes that this receipt is filled out carefully and correctly. You can obtain the restaurant receipt upon request from the respective restaurant; it’s best to ask for it directly when paying. The restaurant receipt contains various fields that must be filled out. Essential information includes:

• Place and date of the meal
• Details of the guests (company/name)
• Reason for the meal
• Entertainment expenses
• VAT rate
• Tip, if applicable

The entertainment receipt must be signed by the business owner. This information is sufficient if the invoice amount does not exceed 250 euros. If this amount is exceeded, additional information is required. This includes details about the restaurant:

• Name and address of the restaurant
• Date of the meal
• Details and prices of the individual food and beverage items
• Tax ID number of the restaurant
• Invoice number

Especially when dealing with larger amounts, you should ensure that all information provided by the restaurant is complete. If you want to be sure, consult your tax advisor in Düsseldorf.

How much can be deducted?

Unfortunately, the costs of hospitality are not 100% deductible. However, you can claim over 70% of the costs as business expenses. Tips are also 70% deductible. If you are eligible for input tax deduction as a business owner, you will receive a 100% refund of the input tax.

Conclusion

If you follow these few basic rules, you can save on taxes with relatively little effort and also treat yourself to a nice meal. As your tax advisor in Düsseldorf, we recommend that you digitize and back up your entertainment receipts. This way, you avoid the documents fading or getting lost. You can find more on this topic in our article “Financial Accounting: The Fatal Beginner’s Mistakes.”

For any questions regarding your financial accounting and entertainment receipts, we are here to assist you as your tax advisor in Düsseldorf and Oberhausen. Get an overview of our services and contact our local team.