Accounting for entertainment expenses - postings

Today, to successfully conduct business, it is practically impossible to do without negotiations with current or potential counterparties, as well as other meetings with them. At the same time, the costs of such entertainment events often continue to cause disputes with tax authorities. What does this mean for 2021? How are they normalized? We help reduce tax risks and tell you how to correctly arrange entertainment expenses in 2021. Also in this article we provide samples of necessary documents that can be downloaded, as well as entries for accounting for entertainment expenses.

What are these events?

As a general rule, entertainment expenses include expenses for official reception and service of representatives of other organizations or members of the board of directors, business owners.

Documentation of entertainment expenses continues to be a necessity in 2021. This category includes the costs of the following activities:

Negotiating with company partners or clients. This also includes counterparties - potential or currently cooperating with the company.
Meetings of the organization's top management bodies - the board of directors, chairmen of the board, supervisory board.

Tax accounting

Entertainment expenses can be taken into account for tax purposes.

Thus, for income tax they are taken within the standard - 4% of labor costs. The standard is considered a cumulative total from the beginning of the year. Therefore, expenses that did not meet the standard in the current quarter can be taken into account in the next quarter.

VAT is deductible only on those entertainment expenses that are taken into account for income tax. If the accounted amount of expenses increases in the next quarter, VAT can be deducted (clause 7 of Article 171 of the Tax Code of the Russian Federation).

Controversial situations regarding entertainment expenses

The wording of the Tax Code of the Russian Federation regarding entertainment expenses is very vague. In this regard, many controversial situations arise. Let's look at some of them.

Business lunches or dinners are usually held in cafes or restaurants. The menu of these establishments usually includes alcohol. Tax authorities, in principle, do not object to including the cost of alcoholic beverages in entertainment expenses.

In particular, the letter of the Ministry of Finance dated March 25, 2010 No. 03-03-06/1/176 states that alcohol can be included in the costs of holding a business meeting. In an earlier clarification of the Ministry of Finance dated 06/09/2004 No. 03-02-05/1/49 it was noted that expenses for alcoholic beverages can be included in entertainment expenses if they do not go beyond the scope of business customs. We are talking about the rules of behavior that have developed in the business community (Article 5 of the Civil Code of the Russian Federation).

Business partners are often given various souvenirs. Here the situation is more complicated. The above-mentioned letter No. 03-03-06/1/176 states that gifts cannot be included in entertainment expenses, since they are not mentioned in paragraph 2 of Art. 264 Tax Code of the Russian Federation.

But a businessman can try to include souvenirs with company symbols in hospitality expenses. However, in this case, disputes with tax authorities are likely. There is judicial practice in favor of taxpayers on this matter (for example, resolution of the Federal Antimonopoly Service of the Moscow Region dated January 31, 2011 No. KA-A40/17593-10).

Often, negotiators come to them from other cities or countries. Sometimes the receiving party bears all expenses: tickets, hotel accommodation, and, if necessary, visas.

All such expenses, according to tax authorities, cannot be classified as representative expenses. Also, the organization of an entertainment program for guests cannot be taken into account for income tax. The officials' arguments here are the same as for souvenirs - these expenses are not listed in clause 2 of Art. 264 of the Tax Code of the Russian Federation (letters of the Ministry of Finance dated April 16, 2007 No. 03-03-06/1/235 and dated December 1, 2011 No. 03-03-06/1/235).

True, a businessman can try to take into account the costs of tickets and hotel as part of “ordinary” other expenses that are not related to hospitality. After all, organizing accommodation for nonresident business partners is necessary for negotiations, which means it can be considered economically justified (Resolution of the Federal Antimonopoly Service of the Moscow Region dated May 23, 2011 No. KA-A40/4584-11).

Generally Allowable Costs of Representation

When making entertainment expenses, documentation is necessary only for official expenses, which include (clause 2 of Article 264 of the Tax Code of the Russian Federation):

Conducting official receptions, meetings and meetings (breakfasts, lunches and other similar expenses are taken into account), taking place both on the territory of the organization and outside it (restaurants, hotels). This category also includes spending on alcoholic beverages.
Transportation costs for transporting guests to and from the event venue.
Buffet services and costs.
Payment for the work of translators who are not on the company’s staff.

KEEP IN MIND
Expenses on alcohol can be taken into account as entertainment expenses if alcoholic beverages are intended specifically for an official event (letter of the Ministry of Finance dated January 22, 2019 No. 03-03-06/1/3120). The Tax Code of the Russian Federation does not specify the list of alcohol costs. Therefore, they can be taken into account without applying additional limits, but taking into account the general restrictions established by law for entertainment expenses.

Why are representation expenses processed?

Entertainment expenses (PR) are allocated to a separate category of enterprise costs in accordance with clause 2 of Art. 264 Tax Code of the Russian Federation. These could be costs:

for the implementation of a business event of a representative nature;
payment for transport and catering services ordered by the company from third-party organizations or individual entrepreneurs as part of a business event;
payment for translation services provided by a third-party company or individual entrepreneur, if it was required during a business event.

PR can be applied in order to reduce the tax base of an enterprise operating on special equipment. But not completely, but only within 4% of the amount of labor costs in the corresponding reporting period.

In order to take advantage of this opportunity, the company will need to confirm that:

expenses are representative expenses (according to Article 264 of the Tax Code of the Russian Federation);
the corresponding expenses are documented and justified (this requirement is established in paragraph 1 of Article 252 of the Tax Code of the Russian Federation).

Certification of both facts can be done through a number of documents. Let's study their specifics.

Stop costs

When taxing, the following expense items cannot be taken into account:

Any entertainment (excursions, bowling, billiards, etc.) and health (swimming pools, fitness rooms, saunas) events for employees, clients, business partners.
Accommodation and travel costs for persons arriving from other localities.
Purchasing presents, gifts, awards and diplomas awarded to participants.

Such expenses are not considered to be related to a business meeting; before or after the official reception – it doesn’t matter either (letter of the Ministry of Finance dated December 1, 2011 No. 03-03-06/1/796).

Conclusion

Entertainment expenses relate to business meetings, negotiations and meetings of the company's governing bodies. The Tax Code of the Russian Federation establishes a list of them for calculating income tax and a norm of 4% of the wage fund. When using special tax regimes, entertainment expenses cannot be written off.

Some wordings of the Tax Code of the Russian Federation in this area allow for ambiguous interpretation, which is why businessmen often have disputes with tax authorities regarding entertainment expenses.

VAT on entertainment expenses can be deducted only in the part that was accepted for calculating income tax.

In accounting, the write-off of entertainment expenses is not limited. Therefore, companies that apply PBU 18/02 may encounter differences between accounting and tax accounting.

Documentation in 2021

Let us say right away that the specific list of documents that need to be used to confirm entertainment expenses is in paragraph 2 of Art. 264 of the Tax Code of the Russian Federation has not been established. However, every fact of economic life must be documented with primary accounting documents. Moreover, they must contain all the mandatory details listed in Part 2 of Art. 9 of the Accounting Law No. 402-FZ and Art. 313 of the Tax Code of the Russian Federation).

To confirm entertainment expenses, primary accounting documents must be prepared for tax purposes. This includes all invoices and acts.

In addition, a report on the event should be drawn up, which is approved by the head of the company. The report contains the following points:

Place and date of the event.
The program according to which the event was held.
Full composition of participants from the hosts and invitees.
The cost of holding the event.

When registering entertainment expenses, the document must indicate whether any transactions were concluded with partners during the process. Such a document will serve as confirmation of the fact that all costs were associated with organizing the executive reception.

Before you issue entertainment expenses consisting of the above reports, it is advisable to take care of two additional documents:

An order for holding a representative event, signed by the head. It should clearly reflect the purpose of the event that caused such costs, as well as a list of company employees who will take part in it.
Cost estimate confirmed by the personal signature of the manager.

The samples of these mandatory documents presented below demonstrate how to correctly process entertainment expenses in 2021. They can be used at any enterprise in Russia.

ORDER ON HOLDING AN OFFICIAL EVENT 2021

ESTIMATED FOR REPRESENTATION COSTS 2021

REPORT ON THE OFFICIAL EVENT 2021

How to draw up an act for entertainment expenses (sample document structure)

This act is usually drawn up at the end of an official event. For this purpose, a special commission of competent specialists can be formed at the enterprise. Their task is:

in the correct preparation of the document;
carrying out an analysis of the data reflected in it, as well as making a responsible decision to recognize the expenses that are recorded in the act as justified;
supplementing the document with other necessary sources.

The relevant commission may include a chairman, as well as ordinary participants.

The act in question may contain:

date, title of the document;
information about the representative event held (its name, location);
information about the competent employees drawing up and certifying the act;
a list of PRs, as well as the amounts that correspond to them and are certified by competent employees;
the conclusion of competent employees on the validity of the implementation of the PR specified in the act;
signatures of the competent employees who drew up the act.

An act on PR can be either an independent local regulatory act or an annex to another standard - for example, an order to hold an official event.

An important nuance: despite the fact that the act in question is signed, as we noted above, by competent persons, the Federal Tax Service of the Russian Federation believes that it should also be approved by the director of the company (letter of the Federal Tax Service of the Russian Federation for Moscow dated December 22, 2006 No. 21-11/113019).

The document in question may also include links to documents that confirm the PR. For example, for a primary account, which is also issued in order to certify the legality of writing off these expenses.

Note that the primary report, as a rule, supplements the report, and not the PR act. However, in many companies the first document includes elements of the second or corresponds to its structure, but is called a PR report.

Business travel expenses

Representation expenses of a seconded employee include expenses for:

official reception and/or service (including buffet) of representatives of other organizations, as well as officials of the organization itself;
transport support for delivery to and from the venue of the representative event and/or meeting of the governing body;
payment for the services of translators (not on staff of the organization) during entertainment events.

Entertainment expenses also do not include expenses for organizing entertainment, recreation, prevention or treatment of diseases.

To justify entertainment expenses on a business trip, two documents are sufficient:

A report on entertainment expenses, which was approved by the head of the organization.
Advance report.

The employee attaches primary documents to these reports. For example, cash receipts, acts, etc. Such requirements are contained in letters of the Federal Tax Service of Russia dated May 8, 2014 No. GD-4-3/8852, Ministry of Finance dated April 10, 2014 No. 03-03-RZ/16288.

Results

In order to use entertainment expenses to reduce the tax base, the company must register them correctly. For these purposes, the financial department of the Russian Federation prescribes the use of documents such as a report on a representative event, as well as primary documentation supplementing it. The most important part of this report may be the program of the event (however, it can also be issued as a separate document).

You can study other useful information about entertainment expenses in the article “We are preparing a justification for entertainment expenses - a sample .
You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.

What wiring to do?

In accounting, entertainment expenses are written off in full as expenses for ordinary activities (clause 5 and clause 7 of PBU 10/99). The wiring should be as follows:

Dt 26 (44) - Kt 60 (71): entertainment expenses written off
Dt 19 - Kt 60 (71): VAT is taken into account on expenses incurred through an accountable person
Dt 68 - Kt 19: VAT deduction on entertainment expenses
Dt 91 - Kt 19: at the end of the year, VAT on excess expenses was written off

How to take into account tax differences on hospitality expenses

All companies, except small businesses , must apply PBU 18/02 and take into account differences in income tax. These differences arise, among other things, when accounting for entertainment expenses.

If in the reporting period a businessman wrote off less entertainment expenses in tax accounting than in accounting, then he has a deferred tax asset (DTA). This means that potentially in the next reporting period the organization can further reduce income tax.

The deferred tax asset is equal to 20% of the cost variance, which corresponds to the amount of income tax. IT is accounted for in a separate account 09 in correspondence with the account for accounting for this tax:

DT 09 – CT 68.4 – deferred tax asset accrued

If in the following periods a businessman can additionally write off entertainment expenses or part of them in tax accounting, then they can be reduced by reverse posting:

DT 68.4 - KT 09