A Japan subsidiary with paid-in capital of JPY 100,000,000 or below can deduct the greater of a flat JPY 8,000,000 annual allowance or 50% of eligible entertainment meal spend. A larger company can only deduct 50%, with no deduction at all once capital exceeds JPY 10,000,000,000. Meals at JPY 10,000 or less per person escape the cap entirely.
How Much Entertainment Expense Can a Foreign-Owned Japan Company Deduct?#
The answer depends on your company's paid-in capital, not on how the spend is characterized internally. Under the Act on Special Measures Concerning Taxation (租税特別措置法), Article 61-4, a small and medium corporation (中小法人, defined as capital of JPY 100,000,000 or below) may deduct whichever is greater: (a) a flat annual allowance of JPY 8,000,000 (定額控除), or (b) 50% of eligible entertainment meal expenses (接待飲食費, food and drink spent entertaining clients or business partners). The company elects whichever produces the larger deduction for the fiscal year; there is no requirement to pick one method permanently.
This matters directly for a newly incorporated KK or GK, most of which are capitalized well under JPY 100,000,000 and therefore qualify for the flat allowance. A company spending modestly on client development in its first year, well below JPY 16,000,000 in entertainment meals, will almost always do better taking the flat JPY 8,000,000 allowance than the 50% formula. Once entertainment meal spend clears that break-even point, the 50% method overtakes the flat allowance. For related questions on structuring costs between a foreign parent and its Japan officer, see our GK officer expense reimbursement guide, which covers a distinct reimbursement structure, not routine client entertainment.
What Counts as Entertainment Expenses (交際費) and What Does Not?#
Entertainment expenses (交際費等) cover spending on clients, suppliers, and other business counterparties intended to deepen the relationship: meals, gifts, and similar hospitality. A large corporation, defined as capital above JPY 100,000,000, does not get the flat allowance at all and may deduct only 50% of eligible meal expenses (飲食費), with no deduction whatsoever once capital exceeds JPY 10,000,000,000. The distinction is purely about capital size, not revenue or profitability, which is why it deserves attention at the incorporation-structuring stage rather than after the fact.
Getting this capital threshold wrong at formation has knock-on effects beyond entertainment deductibility. A related capital-driven Japan tax obligation is the per-capita portion of corporate inhabitant tax, which applies even to a loss-making subsidiary; our guide to that tax at zero profit covers the mechanics. Broader questions on structuring a Japan tax and legal footing are covered in our tax and legal consulting overview.
What Keeps a Client Meal Out of the 交際費 Cap Entirely?#
A meal with a per-person meal expense (飲食費) of JPY 10,000 or less is excluded from 交際費 entirely and instead treated as a meeting expense (会議費), which is fully deductible with no percentage cap and no annual ceiling. This threshold was raised from JPY 5,000 to JPY 10,000 for spending on or after April 1, 2024, under Japan's Reiwa 6 (令和6年度) tax reform, roughly doubling the room available to keep routine client meals off the capped 交際費 line entirely.
The threshold is strict and per-person, not an average across the group. If the actual per-person cost for a meal exceeds JPY 10,000, the entire amount falls into capped 交際費, not just the portion above the threshold. A dinner for four at JPY 42,000 total, JPY 10,500 per head, is fully subject to the 交際費 cap; the same dinner at JPY 39,800, or JPY 9,950 per head, is fully deductible 会議費. This makes per-person arithmetic, not total spend, the operative planning variable when booking client meals.
Key points:
(a) 中小法人 with capital of JPY 100,000,000 or below deduct the greater of a JPY 8,000,000 flat allowance or 50% of eligible entertainment meal spend; large corporations deduct only 50%, with no deduction above JPY 10,000,000,000 capital.
(b) A meal at JPY 10,000 or less per person, effective April 1, 2024 under the Reiwa 6 reform, is reclassified as fully deductible 会議費 with no cap; exceed JPY 10,000 per person by even a small margin and the full amount falls into capped 交際費.
(c) Every claim, whether 交際費 or 会議費, requires contemporaneous records of the date, participant names and business relationship, headcount, amount, and venue name and address; the Qualified Invoice needed for consumption tax input credit is a separate document from the receipt.
What Records Do You Need to Support a 会議費 or 交際費 Claim?#
Both categories require the same core documentation trail: the date, the names and business relationship of the participants, headcount, the amount spent, and the venue name and address. This record is what lets you defend the per-person calculation underlying a 会議費 characterization, and it is equally required to support a 交際費 claim generally. Missing any one of these elements weakens the position that a given meal belongs in the uncapped category rather than the capped one.
Consumption tax (JCT) input credit on the same spend is a separate matter from the income tax characterization above. To claim JCT input credit, the underlying purchase needs a Qualified Invoice (適格請求書, インボイス) issued by the vendor. A card usage statement (利用明細書) is explicitly not a Qualified Invoice, so the original vendor receipt has to be retained separately even when the payment itself is tracked through a corporate card statement. For companies structuring their broader compliance calendar around these overlapping income tax and consumption tax requirements, our tax and legal consulting page outlines the full scope of support available.
Frequently Asked Questions#
Can a foreign-owned KK just expense all client dinners as a business cost?
No. Client meals in Japan fall under specific rules rather than general deductibility: a meal at JPY 10,000 or less per person is fully deductible as 会議費, while anything above that per-person threshold is capped 交際費 subject to the flat-allowance-or-50% formula under the Act on Special Measures Concerning Taxation, Article 61-4. The capital size of the entity, not its revenue, determines which formula applies.
Does the JPY 10,000 threshold apply to the total bill or the per-person cost?
It applies strictly per person, not to the total or an average. If any reasonable per-person split of the bill exceeds JPY 10,000, the entire spend is treated as capped 交際費, not just the amount above the threshold, so tracking headcount accurately at the time of the meal is essential.
What happens if we do not keep the participant and venue records?
Without the date, participant names and business relationship, headcount, amount, and venue name and address on file, a company cannot substantiate either a 会議費 claim or a 交際費 claim if questioned, and separately cannot support the JCT input credit without the original vendor receipt, since a card statement alone does not qualify as a Qualified Invoice.
Conclusion#
The practical planning point for a foreign-owned KK or GK is arithmetic, not intent: keep client meals at or under JPY 10,000 per person where feasible, and log participant, venue, and business-purpose detail every time regardless of which category the spend falls into. Above that per-person line, the capital-based formula under Article 61-4 determines how much of the spend is deductible at all.
This article is informational only and does not constitute legal, tax, or regulatory advice. Consult a qualified advisor before acting on the content. Last updated: September 2026.