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Limited entertainment expenditures allowed on business income (20-02-2017)


 
Federal Board of Revenue (FBR) said that business persons can avail limited deduction of expenditures incurred on business meetings while calculating taxable income.
According to Income Tax Rules, 2002 updated February 10, 2017, there is limitation on the deduction of entertainment expenditure incurred by a person.
The rules explained the expenditures incurred on entertainment, which included:
(a) expenditure incurred outside Pakistan on entertainment in connection with business transactions or where such expenditure is allocated as head office expenditure;
(b) expenditure incurred in Pakistan on entertainment of foreign customers and suppliers;
(c) expenditure incurred on entertainment of customers and clients at the person’s business premises;
(d) expenditure incurred on entertainment at a meeting of shareholders, agents, directors or employees; or
(e) expenditure incurred on entertainment at the opening of branches.
A person shall be allowed a deduction only for expenditure incurred on the entertainment of persons related directly to the person’s business.
 
In this rule, “entertainment” means the provision of meals, refreshments, and reasonable leisure facilities in accordance with the tradition of business and subject to overall norms and customs of business in Pakistan.
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