Client Entertainment Expenses: How Much Can You Deduct, and Is There a Cap?

Written by the team at Prompt Plus Accounting · About us · 2026-10-24

Entertainment expenses are deductible up to 0.3% of revenue or paid-up capital, capped at THB 10 million, with specific rules for gifts and documents. See how the cap is calculated, with examples.

Legal basis

Section 65 ter (4) of the Revenue Code disallows entertainment or service expenses to the extent that they do not meet the criteria set out in a Ministerial Regulation. Those criteria are found in Ministerial Regulation No. 143 (B.E. 2522 / 1979), as amended by No. 222 (B.E. 2542 / 1999). In short, entertainment expenses are not automatically deductible; all of the conditions must be met.

Conditions that must all be met

1. Customary business practice, and a recipient who is not your own employee The expense must be necessary under general business custom. The person entertained must not be an employee of the company, unless that employee has a duty to take part in the entertainment, for example a salesperson who joins the client at the dinner table.
2. A direct entertainment cost, or a gift within the per-person limit The expense must relate directly to entertainment that benefits the business, such as accommodation, meals, beverages, shows or sports. Alternatively, it may be a gift to the person entertained, which counts as an entertainment expense only up to THB 2,000 per person on each occasion. The part above that amount is non-deductible.
3. Within the statutory cap (explained below)
4. Approved and documented A director, partner or manager, or a person they have delegated, must approve or authorize the payment. A receipt or other evidence from the payee is also required, unless the payee is not obliged to issue a receipt under the Revenue Code.

How does the cap work?

Cap = 0.3% × base, where the base is the higher of:

• revenue or sales that must be included in the net profit computation for the accounting period, before deducting any expense; and
• paid-up capital on the last day of the accounting period (not registered capital).

The cap may not exceed THB 10 million per accounting period. Entertainment and service expenses, gifts included, share one cap.

• Revenue THB 20 million / paid-up capital THB 1 million → revenue is the base; cap THB 60,000
• Revenue THB 2 million / paid-up capital THB 5 million → paid-up capital is the base; cap THB 15,000
• Revenue THB 5 billion / paid-up capital THB 500 million → 0.3% gives THB 15 million, but the cap is limited to THB 10 million

For a small business with revenue of THB 1 million and paid-up capital of no more than THB 1 million, the cap is only THB 3,000 a year, so it is easy to exceed.

Worked example

ABC Co., Ltd. has annual revenue of THB 20,000,000 and paid-up capital of THB 1,000,000. It booked THB 70,000 as “entertainment” for the year:

• Client meals totaling THB 50,000 (receipts held, approved by a director) → meets the conditions
• New Year gifts to 10 clients at THB 1,500 each, THB 15,000 in total → meets the conditions (within THB 2,000 per person)
• A gift worth THB 5,000 to a major client → only THB 2,000 counts; the other THB 3,000 is non-deductible

Step 1: Qualifying entertainment = 50,000 + 15,000 + 2,000 = THB 67,000.

Step 2: Cap = THB 20,000,000 (revenue, which is higher than paid-up capital) × 0.3% = THB 60,000.

Step 3: The deductible amount is THB 60,000, because THB 67,000 exceeds the cap by THB 7,000.

Against the THB 70,000 booked, only THB 60,000 is deductible (70,000 − 60,000), so ABC must add back THB 10,000 in its taxable profit computation: THB 3,000 for the part of the gift above THB 2,000, and THB 7,000 above the cap. If its profit is taxed at 20%, the additional corporate income tax is THB 2,000.

Note: the figures exclude VAT to keep the principle clear. See the VAT section below for how non-creditable input VAT is treated.

Common mistakes

• Booking staff parties as entertainment. A party for employees is not entertainment under the regulation. Treat it as another type of expense, such as employee welfare, under the rules for that expense.
• No approval or no receipt. This fails condition 4, and the expense may be rejected even when it is within the cap.
• Gifts above THB 2,000 per person per occasion. The excess is not deductible.
• Mislabeling expenses to avoid the cap. In an audit, the Revenue Department looks at the real nature of the expense, not the account name.
• Claiming input VAT on entertainment. See the next section.

VAT on entertainment

Input VAT on entertainment expenses is non-creditable under Section 82/5(4) of the Revenue Code, read with Clause 5 of the Director-General’s Notification on Value Added Tax (No. 17). The rule covers accommodation, meals, beverages, shows, sports and gifts given to the person entertained, regardless of who receives them and whether the business benefits. So even when entertainment stays within the 0.3% cap, you cannot offset the input VAT against output VAT or claim a refund.

The non-creditable VAT is not lost for income tax purposes. Section 65 ter (6 bis) allows input VAT that is non-creditable under Section 82/5(4) to be treated as an expense in computing net profit, so it can be included in the entertainment expense. It then counts toward the cap, and practitioners generally measure the THB 2,000 per-person gift limit on the VAT-inclusive cost. For borderline cases, confirm the treatment with the Revenue Department.

Before the year-end close

1. Total the year’s entertainment and service expenses and compare them with the cap based on revenue or paid-up capital.
2. Separate non-entertainment items in the books from the start, such as staff parties and personal expenses.
3. Keep complete records: receipts, approval records and, as good practice, a note of whom you entertained, when, and for what business purpose, so that you can explain the expense in an audit.

Summary

Entertainment expenses are deductible as actually paid, but only if they meet the conditions on recipients, type of expense, approval and receipts. Gifts count up to THB 2,000 per person per occasion, and total entertainment and service expenses may not exceed 0.3% of revenue or paid-up capital (whichever is higher), up to a maximum of THB 10 million. Amounts above the cap or outside the conditions are added back to taxable profit. Input VAT on entertainment is always non-creditable, although it may be treated as part of the deductible entertainment expense. Check your totals and records before closing the books, and consult a tax and accounting professional if you are unsure whether an item qualifies as entertainment.

This article is general information, not advice for a specific case. Please consult us before making a decision.