Taking customers hunting? Don't forget what needs to be included in the financial statements

A day of hunting can provide an opportunity for meaningful conversations and strengthen relationships with customers and business partners.

However, when the company covers the cost, it must also be clear what the expense covers, who attended, and how the event relates to the business.

A recently reported decision by the National Tax Tribunal underscores how important it is to have the proper documentation in place.

An expense listed in the financial statements is not enough

A ruling by the National Tax Tribunal illustrates the potential consequences of a lack of documentation.

A company had claimed a portion of its hunting expenses as entertainment expenses but was unable to provide invoices or other external supporting documents. There were participant lists with anonymized names, but these did not document the expenses. Consequently, the company’s deduction was not approved.

The practical lesson is simple: Keep the documentation with your accounting records so you can show what the company paid for, who attended, and what the occasion was.

What can the company deduct?

Hunting events for business associates may, in general, be considered entertainment expenses. When the conditions are met, the company may deduct 25% of the expense for tax purposes.

Among other things, this requires a clear business-related connection and documentation. Therefore, receipts do not automatically make a private event a tax-deductible expense.

Make documentation part of the planning process

When inviting customers or business partners, we recommend that you include the following along with the attachments:

• Invoices and receipts showing what the company has paid for.
• Date and occasion of the event.
• The participants' names, companies, and relationship to your company.
• A brief description of the business purpose.

Save the information as you go, while the details are still fresh in your mind. This makes bookkeeping easier and provides a better basis if questions arise later.

At BUUS JENSEN, we’re happy to help you assess the costs and get your documentation in order. Feel free to reach out to us as early as the planning stage if you have any questions.