Deductible entertainment expenses

Entertainment expenses are expenses for food and drinks with which a company entertains guests. How much of this is deductible for tax purposes depends on who is entertained and for what reason. The rule is set out in § 4 (5) sentence 1 no. 2 EStG: for business entertainment, 70% of the costs are deductible as a business expense.

When are entertainment expenses 70% deductible?

If customers, business partners or prospects are entertained for business reasons, 70% of the reasonable costs are deductible. This also applies to the share attributable to the company’s own participants. Typical cases are a business meal with customers or a lunch during contract negotiations.

When are entertainment expenses 100% deductible?

• Staff entertainment: if only the company’s own employees are entertained, for example at a working meal in the team, an internal training course or a company event, the costs are fully deductible. For the employees, however, this can be wages, for example at a company event above the tax-free amount of €110 per person.
• Entertainment as part of the business: if the entertainment is part of a service with which the company earns money, for example catering at a paid seminar the company offers, the reduction to 70% does not apply.
• Small courtesies: coffee, water or biscuits at a meeting do not count as entertainment and are fully deductible.

Non-deductible entertainment expenses

The following are not deductible:

• the remaining 30% of business entertainment,
• unreasonably high costs that go beyond the business occasion,
• entertainment for private reasons, for example a birthday dinner with friends,
• entertainment without the necessary records. In this case, the deduction can be lost entirely, not just 30%.

The non-deductible part does not reduce taxable profit, neither for income or corporation tax nor for trade tax. In accounting, it is therefore posted to a separate account, for example 4654 (SKR03) or 6644 (SKR04).

Input VAT on entertainment expenses

The VAT on business entertainment is fully deductible as input VAT, including for the non-deductible share of 30%. A proper invoice is required. If the amount exceeds €250 gross, it must be made out to the company.

What the entertainment receipt must contain

For the deduction, records of the place, date, participants, occasion and amount of the costs are required. For entertainment in a restaurant, this includes the machine-generated invoice listing the individual food and drinks. It must come from a till with a technical security device (TSE). The host signs the details. The details are set out in the BMF letter of 30 June 2021.

Entertainment on business trips

If an employee on a business trip takes part in business entertainment, the meal counts as provided. Their per diem is then reduced, in Germany by €11.20 for a lunch or dinner. This is often forgotten.

Entertainment expenses with Spesenfuchs

In Spesenfuchs, you record the persons entertained, the place and the occasion. From this, Spesenfuchs creates an entertainment receipt, with the signature taken automatically from your master data. When passing data on to accounting, Spesenfuchs automatically splits the amount into 70% deductible and 30% non-deductible costs. The split can be switched off, for example if your tax advisor books it once a year. How to enter a receipt is shown in the support guide on entering receipts (in German).

Typical mistakes

• Entertainment receipt incomplete or not signed
• Occasion too general, for example just “business meal”
• Staff entertainment and business entertainment confused
• Per diem not reduced for entertainment on trips

More on the term itself under entertainment expenses.

Legal basis and sources: § 4 (5) no. 2 EStG, § 15 UStG, BMF letter of 19 November 2025 on entertainment