Guide
Business entertainment, travel and per diems
We keep the records and documentation for business entertainment, official travel, per diems, fuel, phone and rent, and recognize in the tax balance only what the regulations allow, within the statutory limits.
Business entertainment, official travel and per diems are among the costs that companies most often treat incorrectly, because not every expense is recognized in the tax balance, nor in its full amount. Under the Corporate Income Tax Act, some expenses are recognized only up to a certain percentage of revenue, some only with proper documentation, and some are partly treated as the employee's personal income subject to tax. The goal is to use legitimate business costs to the extent the law allows, while avoiding having them later disallowed in a Tax Administration audit. In this guide we explain which costs are recognized and under what conditions, and what documentation you must keep for them.
What you should know
- Business entertainment costs (business lunches, gifts, hosting partners) are recognized in the tax balance only up to 0.5 percent of total revenue, provided they are documented and incurred in connection with the activity; the amount above that limit increases taxable profit. Advertising and promotion costs are recognized as an expense within the statutory limit tied to total revenue.
- A travel order is issued before departure for an official trip, and the employee is entitled to a per diem and reimbursement of transport and accommodation costs; the per diem for domestic official travel is not taxed up to a non-taxable amount set by the state and adjusted periodically, while the portion above that limit is taxed as salary.
- Per diems for official travel abroad and the related reimbursements are calculated under the applicable Government decree governing the reimbursement of costs of official travel abroad, with amounts prescribed per country; recognition requires a travel order with a report and supporting invoices.
- Fuel and vehicle use costs are recognized if the vehicle serves the business and there is evidence of business use (travel orders, mileage records, fuel invoices); for an employee's private vehicle used for official purposes a reimbursement is paid that is non-taxable up to the prescribed amount per kilometer traveled.
- Phone, internet and office rent costs are recognized when they are billed to the company and serve the activity; for rent from an individual, the company as the payer calculates and pays withholding tax on the rental income, and everything must be covered by a contract and the appropriate documentation (with an e-invoice via SEF where there is an obligation to issue one).
- The basic condition for recognizing each of these costs is a credible document (invoice, contract, travel order, decision) that is in the company's name and clearly shows the business purpose; costs without documentation or of a personal nature are not recognized in the tax balance.
How we handle it
- 01 Review and classification of costs We collect your invoices and statements and classify the costs into business entertainment, advertising, official travel, vehicle, phone and rent, so we can apply the correct tax rule to each.
- 02 Travel orders and per diem calculation We prepare travel orders for domestic and foreign official trips and calculate per diems and cost reimbursements, taking care of the non-taxable amounts and prescribed limits.
- 03 Applying statutory limits We recognize business entertainment up to 0.5 percent of total revenue and advertising and promotion costs up to the statutory limit, while recording the amount above the limit as a non-deductible expense in the tax balance.
- 04 Vehicle, phone and rent We check the evidence of business use of the vehicle and fuel, post phone and rent costs that are billed to the company, and calculate withholding tax when rent is paid to an individual.
- 05 Preparing the tax balance We include all costs in the tax balance (form PB 1) and the tax return, clearly separating deductible from non-deductible expenses so that taxable profit is accurate.
- 06 Keeping documentation for audits We keep orderly documentation (travel orders, contracts, invoices and decisions) ready for any Tax Administration audit, which prevents costs being disallowed later.
Company formation
We register your company with APR and handle all tax and banking obligations.
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