Should entertaining be zero-rated or no VAT?

Gefragt von: Lucie Henke B.Sc.
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In most cases, business entertainment is neither zero-rated nor does it have "no VAT" in the sense that the business does not pay anything; instead, it is a blocked expense, meaning that the VAT paid on the expense by the business cannot be recovered.

Is business entertainment VAT exempt or zero-rated?

Business entertainment is neither VAT-exempt nor zero-rated. It is classified as a blocked expense, meaning VAT must be paid but cannot be recovered. However, certain types of business-related entertainment, such as training sessions that include meals, may allow VAT recovery.

Is entertainment VAT exempt?

A vendor can't claim input tax on goods or services that are for entertainment purposes. (Vat Act section 17(2) (a)). So if you're trying to claim from SARS on stuff purely for entertainment, you're not going to get any money from SARS.

When to use zero-rated VAT?

Examples of zero-rated goods and services

  1. Advertising services for charities.
  2. Certain goods sold at charitable fundraising events.
  3. Equipment for disabled people.
  4. Freight transport to or from a place outside the UK.
  5. Maternity pads and sanitary protection products.
  6. Sale or long lease of a new dwelling.

Is VAT recoverable on client entertainment?

In most cases, the answer is no. HMRC typically disallows VAT recovery on entertainment expenses for clients or non-employees. However, VAT can be recovered on certain employee-related expenses, business travel, and specific exceptions, such as entertaining overseas clients.

Claiming VAT on entertainment and subsistence

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Can I claim client entertainment as a business expense?

No. You can't claim either tax relief or VAT on business entertaining for anyone who is not an employee of your business. An exception to this rule would be a situation where directors and partners of the business attend an event such as a staff party together with other employees.

What type of entertainment is not deductible?

The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the deduction for most entertainment expenses. Now, entertainment, amusement, or recreation activities are mostly not deductible. Previously, tickets to shows or sporting events you give to clients to promote business were deductible.

Who qualifies for zero-rated VAT?

Services rendered to foreign clients qualify for zero-rated VAT if the services are performed in the Philippines for a client doing business outside the Philippines, and the payment for these services is made in foreign currency and inwardly remitted through BSP-authorized banks.

What activities are exempt from VAT?

Supplies that must be exempt include activities in the public interest such as medical care and social services, as well as most financial and insurance services and certain supplies of land and buildings.

Why are some items VAT zero-rated?

Zero-rated goods, in countries that use value-added tax (VAT), are products that are taxed at a 0% VAT rate, meaning no tax is charged on their sale. These goods are often essential items, such as basic food staples, books, or children's clothing, designated as zero-rated to make them more affordable for consumers.

Can I claim GST on client entertainment?

Income tax and GST credits

can't claim an income tax deduction or GST credits for the entertainment provided to the clients.

Is entertainment deductible in 2025?

In general, if you are entertaining a client by, for example, taking them to a sports game or a concert, those expenses are not deemed deductible. Entertainment expenses fall into the 0% deductible category from the IRS.

Can I claim VAT on a staff Christmas party?

VAT can be reclaimed if the event is solely for employees. If clients, suppliers, or other non-employees attend, only the portion relating to employees can be reclaimed. Keeping costs separate is essential to ensure your claim is accurate and compliant with HMRC rules.

Is zero-rated the same as exempt?

The Key Differences Explained – GST Exempt vs GST Zero Rated

GST Treatment: 'No GST' transactions are exempt from GST, while 'Zero-rated GST' transactions have GST applied at 0%. GST Returns: Zero-rated transactions must be included in your GST returns, while exempt transactions do not appear.

How much entertainment is tax deductible?

However, the Tax Cuts and Jobs Act (TCJA), enacted in December 2017, made a significant change by eliminating the deduction for most entertainment expenses starting in 2018. The TCJA also retained the 50% deduction for business meals, provided certain conditions are met.

Why would a company be exempt from VAT?

Products that shouldn't be taxed are considered to be exempt from VAT. Businesses, charities, and other types of organisations can also be considered to be exempt from VAT. A business is VAT-exempt if they only sell VAT-exempt products, or if they're not involved with taxable 'business activities'.

What is the difference between exempt and zero-rated VAT?

VAT exemption: No VAT is charged on exempt items or services, and the supplier cannot claim input VAT as a credit or refund. Zero-rated VAT: VAT is technically applicable at a 0% rate, but the supplier does not collect VAT from the customer. The supplier can usually claim input VAT.

What conditions are VAT exempt?

Examples of VAT exempt conditions include, but are not limited to:

  • Blind.
  • Deaf.
  • Epilepsy.
  • Cancer.
  • COPD.
  • Stroke.
  • Arthritis.
  • Multiple Sclerosis.

What services are VAT exempt?

When not to charge VAT

  • financial services, investments and insurance.
  • garages, parking spaces and houseboat moorings.
  • property, land and buildings.
  • education and training (excluding private schools)
  • healthcare and medical treatment.
  • funeral plans, burial or cremation services.
  • charity events.
  • antiques.

What are examples of zero-rated items?

Common examples of zero-rated sales include basic groceries, prescription drugs, and certain medical devices. Understanding zero-rated sales is essential for both consumers and businesses, as it affects pricing and tax obligations.

What is the zero-rated rule?

In simple terms, zero-rated supplies are goods and services that are taxable but charged at 0% VAT. That means your customers don't pay any VAT, but your business can still reclaim VAT on purchases related to those sales.

What is the threshold for VAT exemption?

Businesses with annual taxable supplies and imports exceeding AED 375,000 must register for VAT. Businesses with turnover between AED 187,500 and AED 375,000 can register voluntarily.

Why is entertainment not tax deductible?

Fringe benefits

Keep in mind that entertainment provided to people other than employees or their partners (for example, to your clients) is not subject to FBT. This will generally mean you cannot claim a tax deduction for entertainment expenses provided for clients.

What entertainment expenses are allowable?

What's included. Entertainment can involve eating, drinking and other hospitality. Types of entertainment include: 'business entertainment' of clients - for example, discussing a particular business project or forming or maintaining a business connection.

Is entertainment an allowable deduction?

entertainment element are allowed:- o a deduction of 50% (Example 14 of the PR); or o a deduction of 100% if the expenses falls under the provisos (i) to (viii) of Section 39(1)(l) of the Act (Example 15 of the PR). element are allowed a full deduction of 100% under Section 33(1) of the Act (Example 13 of the PR).