What are entertainment expenses
Legislation includes the following as entertainment expenses:
- costs of holding business events in which representatives of third-party organizations take part in order to conclude business agreements, or company employees participating in the board of directors (general meeting of the board);
- travel costs associated with the above event;
- translation services for this event.
The amount of entertainment expenses involved in reducing profits cannot be more than 4% of the wage fund for the corresponding period.
Income tax: entertainment expenses
Costs recognized as representative expenses can be used to reduce the income tax base. For this purpose, the amount within the calculated limit is taken into account (more about rationing here). The limit is fixed at 4% of the costs associated with remuneration of personnel in the reporting period. The standardized indicator is calculated based on the results of each reporting period during the year, cumulatively.
Example
In the 1st quarter, the accountant carried out entertainment expenses in the amount of 105,000 rubles, in the 2nd quarter - 20,050 rubles, in the 3rd and 4th quarters there were no official meetings or negotiations. The company's personnel costs were at the following level:
- in the 1st quarter – 750,250 rubles;
- in the 2nd quarter – 802,135 rubles;
- in the 3rd quarter – 564,250 rubles;
- in the 4th quarter – 1,020,540 rubles.
To calculate income tax at the end of the year, an accountant can offset 125,487 rubles ((750,250 + 802,135 + 564,250 + 1,020,540) x 4%). The total amount of entertainment expenses for the tax period was 125,050 rubles (105,000 + 20,050). In calculating the tax base, you can include the entire amount of costs incurred for organizing negotiations and official receptions, since their amount is within the limit for the reporting year (the limit is 125,487 rubles, which is 437 rubles more than the actual costs).
At the end of the year, the enterprise's income amounted to 11,210,590 rubles (including VAT of 1,710,090 rubles), expenses by group are equal to:
- production costs – 3,507,000 rubles;
- for wages – 3,137,175 rubles;
- depreciation charges – 850,044 rubles;
- representation costs – 125,050 rubles.
The tax base will be 1,881,231 rubles. ((11,210,590 – 1,710,090) – 3,507,000 – 3,137,175 – 850,044 – 125,050). The final amount of the annual income tax is 376,246 rubles. (1,881,231 x 20%).
Entertainment expenses: documentation 2018
In order to be able to classify the costs of entertainment events as expenses that reduce profits, it is necessary to correctly draw up all the documents confirming them. Most often, when preparing them, three types of documents are used - an order, a report and an act.
According to the latest clarifications in the legislation, only a report with accompanying primary documents on expenses incurred is mandatory. But many organizations prefer to draw up a full package of documents, especially those who are on a simplified taxation system.
Drawing up a statement of claim in court to recover attorney's fees from the defendant
Let’s begin to draw up an application “for the recovery of expenses for the services of a representative.” For example, I will take an application for the recovery of representative expenses from Phoenix LLC, a case in which we were defendants and the court refused to collect funds from Phoenix under a loan agreement due to missing a deadline statute of limitations.
A cap:
To the Kirovsky District Court of St. Petersburg 198095, St. Petersburg, st. Marshala Govorova, 38 From: _____________________________________________ Address: _______________________________________________ procedural position - defendant copy: Phoenix LLC Address: 127284, Moscow, 2nd Khutorskaya, 38A, p. 26 procedural position in the case - plaintiff Case No. _____ Judge:____________
The case number and surname with the initials of the judge are indicated in the decision of the court of first instance, so indicate them in the application.
STATEMENT “for recovery of expenses for payment of services of a representative”
The plaintiff appealed to the Kirovsky District Court of St. Petersburg to the defendant - N.N. with demands for collection of overdue debt under the loan agreement in the amount of 139,384 rubles. 50 kopecks By the decision of the Kirovsky District Court in case No. 2-502 /2020, the plaintiff’s claims were denied in full due to the expiration of the statute of limitations. The reasoned court decision was made in final form in January 2020 and entered into force in February 2020.
N.N. in order to defend their rights and legitimate interests in this case, I had to seek qualified legal assistance, on the basis of Art. 48 Constitutions of the Russian Federation.
In connection with the above, between N.N. and A.V. Eremin, a lawyer at the bar association SWKA "Garant" St. Petersburg, concluded an agreement No. dated "January 2020" for the provision of legal assistance. According to the terms of the agreement, the amount of the lawyer’s remuneration for the provision of services under the agreement is ____ rubles.
Based on clause 1 of Art. 103.1 of the Code of Civil Procedure of the Russian Federation - “An application on the issue of legal costs incurred in connection with the consideration of the case in the court of the first, appellate, cassation instances, consideration of the case by way of supervision, not permitted when considering the case in the appropriate court, may be filed with the court that considered the case as a court of first instance, within three months from the date of entry into force of the last judicial act, the adoption of which ended the consideration of the case.” and Art. 98 of the Code of Civil Procedure of the Russian Federation – “The court in whose favor the court decision was made, the court awards compensation from the other party for all legal expenses incurred in the case, except for the cases provided for in part two of Article 96 of this Code. If the claim is partially satisfied, the legal costs specified in this article are awarded to the plaintiff in proportion to the amount of the claims satisfied by the court, and to the defendant in proportion to the part of the claims that were denied to the plaintiff.” at N.N. , as the party in whose favor the court decision was made, has the right to reimbursement of expenses incurred by it in connection with the consideration of the case in court with Phoenix LLC.
According to Art. 94 of the Code of Civil Procedure of the Russian Federation, legal expenses also include expenses for paying for the services of representatives. Based on the above and guided by Art. Art. 103.1, 94, 98 Code of Civil Procedure of the Russian Federation; I ASK THE COURT: To recover from Phoenix LLC an amount in the amount of rubles in favor of the plaintiff - N.N. as expenses for sleepless expenses to pay for the services of a representative. Appendix: 1. Copy of agreement No. dated 00.00.2020 for the provision of legal services; 2. A copy of the receipt for payment for services under the agreement dated “__”___2020; 3. A copy of the check and a description of the contents in the envelope about sending a copy of the application and attaching it to Phoenix LLC. Date:____________________ Signature:___________
Sample order for entertainment expenses of an enterprise
An order for entertainment expenses is drawn up in the form of an administrative document for the organization, on company letterhead. It contains information about the upcoming event, its goals and expected costs.
An approximate order structure would look like this:
- details of the order (name of organization, date, number, title);
- preamble revealing the purpose of drawing up the order (brief description of the event);
- the administrative part of the order, indicating what needs to be prepared for the upcoming event and identifying the responsible persons;
- manager's signature.
The order may also contain instructions on the need to draw up a report and act for entertainment expenses upon completion of the business event.
How to recover attorney's fees from the defendant
In this article, I will tell you how to correctly recover court costs for a lawyer (lawyer) from the defendant, which you incurred to pay for the services of a representative (lawyer).
Right to recover legal costs
First, you need to figure out whether you have the right to reimbursement of legal expenses, according to paragraph 1 of Article 98 of the Code of Civil Procedure of the Russian Federation - “The party in whose favor the court decision was made, the court awards the other party to reimburse all legal expenses incurred in the case.” Moreover, if your claims against the defendant were partially satisfied, then the amount of expenses will be recovered from the defendant in proportion to the amount of the claim. The same rule applies to the defendant; if the plaintiff’s demands are not fully satisfied, he can also recover from the plaintiff the amount of expenses for a representative, which is proportional to the plaintiff’s unsatisfied demands.
For example, the plaintiff filed claims for flooding an apartment in the amount of 100,000 rubles, but during the course of the case an expert examination was appointed, which showed that the amount of damage was 20,000 rubles. The plaintiff and defendant both turned to lawyers for help and paid them 10,000 rubles each for their services. Then the plaintiff has the right to recover 10,000: (100,00: 20,000) = 2,000 rubles, and the defendant 10,000: (100,000: 80,000) = 8,000 rubles.
The situation is not much different if the claim was not of a property nature, that is, not subject to assessment. Here you need to focus not on the amounts, but on the quantity required. For example, if we are talking about establishing an easement for several passages, then you need to divide the amount of representation expenses by the number of demands for passages and multiply by the number satisfied by the court.
The situation with compensation for moral damage is the same as with a non-property claim, this is reflected in paragraph 21 of the Resolution of the Plenum of the Supreme Court of the Russian Federation dated January 21, 2020 No. 1
The provisions of procedural legislation on proportional compensation (distribution) of legal costs (Articles 98, 102, 103 of the Code of Civil Procedure of the Russian Federation, Article 111 of the Code of Arbitration Procedures of the Russian Federation, Article 110 of the Arbitration Procedure Code of the Russian Federation) are not subject to application when resolving: a claim of a non-property nature, including a claim with a monetary value, directed to protect personal non-property rights (for example, compensation for moral damage);
p. 21 Resolution of the Plenum of the Supreme Court of the Russian Federation dated January 21, 2020 No. 1 “On some issues of application of the legislation on reimbursement of costs associated with the consideration of the case”
I think you have sorted out the amount of the claim, now consider whether you have missed the deadline for filing an application for recovery of legal expenses for the services of a representative.
Deadlines for collecting expenses for a representative
In this article I will talk about the simplified collection procedure. The deadline for applying in this manner is regulated by Article 103.1 of the Code of Civil Procedure of the Russian Federation and, according to the new rules, is three months from the date of entry into force of the last judicial act. That is, if there was no appeal, then this will be a decision of the court of first instance and the period from the moment it enters into legal force must be considered - the date of the decision in final form + one month, as a rule.
An application on the issue of legal expenses incurred in connection with the consideration of the case in the court of first, appellate, cassation instances, consideration of the case in the manner of supervision, not permitted when considering the case in the appropriate court, may be filed with the court that considered the case as a court of first instance , within three months from the date of entry into force of the last judicial act, the adoption of which ended the consideration of the case.
p1. Article 103.1 Code of Civil Procedure of the Russian Federation
If the deadlines are missed, you can try to restore them, if there is a good reason for missing them - clause 2 of Article 103.1 of the Code of Civil Procedure of the Russian Federation or file a claim for recovery of damages in the usual manner, but here you will have to pay a state fee and file at the location of the defendant (I won’t do this here consider this method).
I hope you haven’t missed the deadline, now you need to prepare the documents that you will attach to the application. And so you must have an agreement for the provision of legal services and a cash receipt (a receipt for a cash receipt order, a transfer receipt or an extract), if there is an act of work performed, attach that too. Prepare copies of these documents for the number of persons involved in the case and one for yourself.
Report on entertainment expenses: example
The report is also compiled in free form and is a summary of the past event:
- when and where the event was held;
- its results and agreements (or lack thereof);
- who served this event (a third-party organization, or everything was prepared by company employees)
- expenses for the event (they must be documented);
- a list of supporting documents that will be attached to the report.
All supporting documents must be original.
How to write off entertainment expenses: basic legal principles
Representation expenses (RP) as a separate category of expenses are considered only in tax accounting. Therefore, the procedure for writing off these expenses (in practice, carried out in order to reduce the tax base of the enterprise) should be carried out on the basis of the principles of their confirmation and economic feasibility - key from the point of view of tax accounting.
These principles, in particular, are enshrined in paragraph 1 of Art. 252 of the Tax Code of the Russian Federation, which establishes that in order to reduce the tax base of a company that pays income tax, expenses that are documented and economically justified can be used.
PR can also be used to reduce the tax base - but only in an amount not exceeding 4% of labor costs at the enterprise in the corresponding reporting period (clause 2 of Article 264 of the Tax Code of the Russian Federation).
If, based on the results of the 1st quarter, half a year or 9 months, the company still has unwritten-off PR (exceeding 4% of labor costs), they can be added when calculating tax for the year. But provided that at the end of the year, labor costs will be calculated in the amount at which the required PR norm (4%) is achieved at the end of the tax period.
Act for writing off entertainment expenses: sample
After the event, an act for writing off entertainment expenses is drawn up. The form of this document has not been approved; accordingly, it can be drawn up in any form.
When compiling it, a reference is usually made to an order or report, or it can be an appendix to the order.
It is drawn up by a commission and approved by the head.
The expenses of an enterprise for holding business events are called entertainment expenses. Documentation of these expenses is necessary to confirm their occurrence. For this purpose, an order, report and act for entertainment expenses are drawn up. A sample of these documents is presented below.
Documentation of costs incurred
Entertainment expenses arise for an enterprise in connection with business negotiations or other official events with business partners. The money can be used to pay for translator services, to organize a business lunch, buffet, or transfer. The costs are normalized; the maximum write-off amount cannot be more than 4% of the payroll amount in the tax period.
The law does not provide for certain documents with which taxpayers can confirm the validity and expediency of entertainment expenses. The set of confirmation forms is individual in each case. When planning an official event, business entities must prepare the following set of documents:
- an order for the enterprise to begin preparations for a meeting with partners, instructions are given to responsible persons to complete the necessary tasks to organize the negotiation process;
- plan for the upcoming event;
- itemized cost estimate;
- a list of persons who will be required to attend the meeting;
- algorithm of actions when allocating funds for representation needs;
- approval of a sample act for entertainment expenses for their acceptance for accounting and write-off.
You can confirm the expenses incurred with advance reports with attached receipts, invoices, contracts, a report on entertainment expenses and a write-off statement. Primary forms accepted for accounting as justification for expenses must contain all mandatory details. Their list and general requirements for registration are given in Art. 9 of the Law of December 6, 2011 No. 402-FZ.
Representation expenses and accounting
When establishing (assigning) a second and subsequent profession, the rank, class, category, etc. are indicated.
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