Have Fun Without Worries! It's Tax Deductible!

Updated: 11 Aug 2025

Entertainment expenses include the cost of entertaining customers or employees at social events, clubhouse, restaurant, etc... which is also part of the sales function of many businesses.

The business owner is eligible to claim tax deduction of fifty percent (50%) or hundred percent (100%) of certain entertainment expenses.

Section 18 of the ITA explains any food, drink, recreation or hospitality of any kind and accommodation or travel provided by a person or an employee of his, with or without consideration paid whether in cash or in kind, in promoting or in connection with a trade or business carried on by that person, would be treated as entertainment expenses.

Expenses which is wholly and exclusively incurred in the production of gross income will qualify for tax deduction under subsection 33 (1) of the ITA.

However, only entertainment expenses that are categorized specifically under proviso (i) to (viii) of paragraph 39 (1) (l) of the ITA are fully allowed as a deduction against gross income. Otherwise, only fifty percent (50%) of such expenditure would be allowed for tax deduction.

No	Types of entertainment	Allowed a deduction of		Not allowed for deduction
		100%	50%
1	Cash contribute for client's annual dinner			✘
2	Gift with business logo for client	✔
3	Gift without business logo for client		✔
4	Entertainment to suppliers		✔
5	Hamper for client during festival		✔
6	Hamper for staff during festival	✔
7	Gift of flower for client's opening ceremony		✔
8	Entertainment for AGM of company			✘
9	Annual dinner to employees	✔

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