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Client lunches, gifts and staff parties: what you can deduct

Published 9 September 2026

A lunch with a client and a Christmas dinner with your staff can come from the same restaurant, yet the tax rules treat them in opposite ways. One gives you no VAT back and only half an income tax deduction; the other is deductible in full. What decides it is who was at the table and why, and that is what the receipt has to show.

Three kinds of cost

• Entertainment (edustus). Hospitality aimed at people outside the company, such as clients and business contacts, to win or keep business: a client lunch, a dinner, a gift chosen for one client.
• Staff recreation (virkistys). Events for your own people: the Christmas party, a summer party, a recreation day.
• Ordinary business costs. Internal meetings, board and shareholder meetings, meetings with your auditor or other advisers, open marketing events with light refreshments, and customary promotional gifts. None of these is entertainment.

Entertainment means the same thing for VAT and for income tax, so one classification settles both.

Entertainment: no VAT back, half deductible

VAT on anything used for entertainment cannot be deducted at all: not on the meal, the drinks, gifts, travel or accommodation.

For income tax, a business deducts 50 % of its entertainment expenses. The VAT you could not deduct stays part of the cost, so the whole bill goes to the entertainment account, the tax return asks for that total, and half of it is deductible.

Talking business over the meal does not change this: hospitality meant to move a deal forward is entertainment.

Example: a lunch with a client. You take a client to lunch to discuss next year's work, and the bill for two is 80 euros. No VAT comes back. The full 80 euros, your own meal included, is entertainment, and 40 euros of it is deductible.

Staff recreation: deductible when it is for everyone

The VAT on a staff event is deductible as a general business cost when the company holds a reasonable number of them in the financial year, each is a joint event for the whole staff or a whole unit, and the employer sets the time and place. Neither the name of the event nor the size of the company matters. Christmas and summer parties are the Tax Administration's own examples.

Three things never qualify, because they are private consumption: the share of spouses and other family members, an evening out that a few colleagues decide on the spot, and a gift card or other substitute handed out instead of an event.

For income tax, the company normally deducts staff costs in full, and for employees, customary and reasonable recreation organised by the employer for the whole staff is a tax-free benefit. There is no euro limit for a party; reasonableness is judged case by case from the cost per employee over the year.

Drinks are part of the party: the Supreme Administrative Court allowed the VAT deduction for staff events where alcohol was a sizeable share of the bill (KHO 2015:98).

Example: a staff Christmas dinner. Your Oy invites all six employees to a Christmas dinner at a restaurant it has booked. The VAT is deductible, and so is the whole cost in income tax. Leave any spouses' share out of the VAT deduction, and if two clients come too, their share is entertainment.

Gifts: promotional or entertainment

A customary promotional gift is marketing: its VAT is deductible, and so is the whole cost in income tax. The Tax Administration describes it as a low-value gift given at the same time and in the same form to several recipients, often with the company's name on it, and accepts a VAT-inclusive purchase price of up to 50 euros as customary.

A gift chosen with one person in mind, such as a present for a business contact's 50th birthday, is entertainment: no VAT deduction, half the cost deductible.

Alcohol is where people get caught. In both taxes an alcohol gift is entertainment as a rule, not a promotional gift. The exception is a microbrewery, winery or similar producer giving away its own products, when the usual conditions for a promotional gift are met.

Example: a gift basket for clients. At Christmas you send the same 45-euro basket of coffee and chocolate to all your regular clients. That can count as a customary promotional gift. Add a bottle of wine, or send a 150-euro basket to your biggest client alone, and it is entertainment.

A sole trader with no staff

A toiminimi is not a separate person, so you cannot be your own employee, and the Tax Administration says plainly that a staff benefit you arrange for yourself is not deductible. With no staff there is no staff event: a Christmas dinner for one is a private cost, with no income tax deduction and no VAT back. Once you employ people, you can hold staff events and take part, and your share is not a taxable benefit for you.

An Oy is a separate person, so an owner who actually works in it counts as staff even with nobody else on the payroll. Headcount can still matter when judging what is customary and reasonable, and a benefit given only because someone owns shares can be taxed as a hidden dividend.

What the receipt should say

The burden of proof is on the business: you must be able to show what the occasion was, what the costs were for and who took part. The simplest way to meet it is to write it down the same day:

• the date and the occasion
• who took part, by name and company or role, and whether each was a client, a supplier, an employee or a spouse
• the purpose, such as "lunch with X Oy about the 2027 contract" or "Christmas party for all staff"
• for staff events, the invitation that went to everyone
• for gifts, who received one and what each cost

What we do

We sort these costs every month as part of the bookkeeping, and deduct VAT only where it belongs. If your receipts just say "lunch", book an introduction and bring a few; we will show you what to add. See what we do.

Sources

• Tax Administration: deducting VAT on purchases
• Tax Administration: business tax return (5) for sole traders, instructions for filing
• Tax Administration: income tax return instructions for limited companies
• Tax Administration: entertainment expenses in income taxation, detailed guidance (in Finnish)
• Tax Administration: marketing and entertainment events in VAT, detailed guidance (in Finnish)
• Tax Administration: the VAT guidebook, section 8.2 (in Finnish)
• Tax Administration: staff benefits in taxation, detailed guidance (in Finnish)
• Tax Administration: VAT on own use, including promotional gifts, detailed guidance (in Finnish)
• Supreme Administrative Court: KHO 2015:98 on staff recreation events (in Finnish)
• Finlex: Value Added Tax Act 1501/1993, section 114 (in Finnish)
• Finlex: Business Income Tax Act 360/1968, section 8 (in Finnish)
• Accounting Board (KILA): general guideline on booking VAT, 2017 (in Finnish)

Please note: this is general information about Finnish rules, not advice for your own situation, and the rules change. Ask us before you act on it.

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