Rules and exhibitions

Hospitality expenses are now deductible

Hospitality costs connected with exhibition attendance are now deductible. The provision, which is part of a decree that enforces the terms of the finance act 2008, introduces important changes in the tax treatment of “entertainment expenses” charged during the tax period.

The new principles aim to marry taxation requirements with the realization that some expenses perform corporate business promotional services that are similar to traditional advertising methods.

The decree defines an important and more favourable diversification of the taxation system applied to costs incurred to “host clients” on specific occasions, including exhibitions. In particular, it states that travel and accommodation and subsistence expenses incurred to host clients, including potential clients, during exhibitions, trade shows or similar events, where the goods and services produced by a given company are displayed, are not to be considered as entertainment expenses, and are therefore deductible without any restriction.

Business entrepreneurs are also entitled to a full deduction for travel and accommodation and subsistence costs when required to travel long distances to attend exhibitions, trade shows and other similar events, where the goods and services produced by their company, or immediately relevant to their line of work, are displayed. The decree hence meets an important requirement for small-sized-enterprises.

The decree also provides relief to companies involved in the organization of trade shows, in that any travel and accommodation and subsistence costs incurred to host clients, including potential clients, as part of promotional strategies that are aimed at supporting specific exhibitions and similar events, are not to be considered as entertainment expenses, and as a result, are not legally bound to comply with congruence indexes.
Any lease costs and stand fitting or transport expenses associated with moving the goods to exhibit, can be deducted as ordinary operating costs, which are governed by general regulations.

The new rules positively impact on input VAT deductions applied to the expenses at issue, whose regulation is connected with the entertainment expenses defined for the calculation of income tax rates.

The decree is available in the “ Gazzetta Ufficiale” - the Italian Official Gazette- n.11 of 15th January 2009 .

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