Employee Welfare You Can Actually Deduct, and Why Cloud Accounting Like PEAK Helps

Many owners still try to cut tax by collecting enough expense receipts. If those expenses are not really for the business, that invites a back assessment with penalties and surcharges.

Section 65 ter of the Revenue Code is the list of expenses a company may not deduct, such as personal expenses or gifts (65 ter (3)) and expenses not incurred to earn profit or for the business (65 ter (13)). Employee welfare is deductible only when it falls outside those items.

The Revenue Department has ruled that welfare paid under a clearly written company policy, as a business expense rather than a personal expense or gift, is deductible. Past rulings cover fuel reimbursed at actual cost (anything above actual cost is a personal expense) and sending staff to study when it benefits the company. Rulings apply to their own facts, so each company's situation matters.

One more caution: even when the company can deduct it, most welfare employees receive in cash or in kind is still taxable income for them unless a specific exemption applies, and welfare for directors is examined more closely. Have your auditor review the policy before you use it.

Cloud accounting such as PEAK helps because every welfare item carries a document, a number and a clear account. Auditors can check it quickly, and clean statements help when you apply for bank credit.