Deductibility of entertainment expenses: criteria and limits
It is effective from 15/01/2009 - the day of publication in the Official Gazette n.11/2009 - Decree of the Ministry of Economy and Finance (DM 19/11/2008) specifying the new criteria and limits the deductibility of expenses representation. The DM contains the provisions implementing Article. 108, paragraph 2, of the Consolidated Income Tax Act (consolidated text of income taxes) in respect of expenses.
This article - as amended by the 2008 Budget - required the Ministry of Economy and Finance is responsible for defining the requirements of relevance and appropriateness of such costs.
We analyze in detail the provisions of the decree (which apply to the tax period following 31 December 2007):
Definition of representation expenses
The Decree specifies the general definition of representation costs that fits in the expenditure incurred (and documented) "for free grants of goods and services, for advertising and public relations, reasonable in light of the objective of also potentially generate economic benefits for consistent with the firm or business practices of the field. "
In particular, the costs of:
• tourist trips on the occasion of which are planned and carried out promotional activities of goods or services whose production or exchange is the subject of the core business of the company;
• parties, receptions and other entertainment events organized on the occasion of company anniversaries, national holidays or religious, opening new branches, offices or establishments of the undertaking, exhibitions, fairs, and similar events in which they are exposed as the goods and services produced by 'enterprise;
• goods and services distributed or provided free of charge, including the contributions made free for conferences, seminars and similar events which are incurred to meet the criteria of pertinence.
Their deductibility and rates
These expenses - deductible only in the tax period in which they are incurred - are commensurate with the amount of revenues and income of the company resulting from the tax return for the same period in an amount equal to:
• 1.3% of revenues and other income up to € 10 million;
• 0.5% for the portion between 10 and 50 million;
• 0.1% for the over 50 million.
However, they remain fully deductible expenses related to goods distributed free of charge to a unit value of € 50.
As we said, representation expenses are deductible for the tax period in which they are incurred, but the start-up companies, if not earn income in the year of launch, they can download them from income in the first two years when revenues resulting [if and to the extent that the expenses incurred in these tax periods are valued at less than the deductible amount].
Charges not considered representative not subject to the limits of DM
No representation expenses travel expenses, subsistence expenses for hosting customers - or potential - for exhibitions, trade fairs, exhibitions and similar events in which they are exposed as the goods and services produced by or in connection with visits to locations, or production unit of the company.
Not subject to the limits even travel expenses, board and lodging expenses incurred directly in connection with the participation in exhibitions, fairs, and similar events in which they are exposed goods and services produced by or related to the work.
Documents and data:
• Ministerial Decree of 19/11/2008 | Official Gazette n.11 of 15/01/2009
Rules implementing Article 108, paragraph 2, of the consolidated income tax, in the Decree of the President of the Republic on 22 December 1986, no. 917, relating to expenses.
• Inherence and fairness to deduct entertainment expenses
nuovofiscooggi.it article on Sonia's Angels
• FAQ on the subject of representation costs of fiscoetasse.it
• Comparison between the old and new criteria | Article Dr. Rag. Luigi Risolo
03/03/2009
----------------------------------------
Translated via software
----------------------------------------
Source:
Italian version of ReteArchitetti.it