Entertainment Expenses in Turkey: Rules, Documents, VAT

A business lunch with a client, refreshments for visitors to your trade-fair stand, a hotel stay for a partner flying in from abroad… All of these land in one of the expense categories companies meet most often and question most in the books: entertainment and hospitality expenses (in Turkish, temsil ve ağırlama giderleri).

The difficulty is that Turkish tax law does not define these expenses in a dedicated article. A cost that one company deducts without discussion can become a non-deductible expense for another. This guide walks through what entertainment and hospitality expenses are, when they can be deducted, which documents you need, how VAT and KKEG apply, and how to book them.

What Are Entertainment and Hospitality Expenses?

Entertainment and hospitality expenses are the refreshments, meals, accommodation and similar costs a business incurs to maintain and develop its relationships with customers, prospects, suppliers, business partners or guests.

The two ideas are close, but they can be separated:

• Representation (entertainment) expense: Costs incurred, in line with business custom, to protect and strengthen the standing of the company or an office in the eyes of third parties. Serving coffee to a visitor at the office is the simplest example.
• Hospitality expense: Covering the meals, accommodation, transport and similar needs of people who visit the company because of a business relationship.

Neither the Income Tax Law nor the Corporate Tax Law contains a separate provision titled "entertainment and hospitality". These costs are treated as general expenses under Article 40(1) of the Income Tax Law, meaning costs incurred to earn and maintain commercial income. The same rules apply to corporate taxpayers through Article 6 of the Corporate Tax Law.

Which Costs Count as Entertainment and Hospitality?

In practice, the main costs recorded as entertainment and hospitality expenses are:

• Business meals with customers, suppliers or business partners
• Tea, coffee, soft drinks and similar refreshments offered to office visitors
• Accommodation and local transport for guests who come for business meetings
• Refreshments for attendees at trade fairs, dealer meetings, launches and similar events
• Gifts sent to customers and partners on special occasions to support the company's reputation
• Food and drinks served to guests at corporate events and meetings

One distinction matters here: meals provided to employees, costs employees incur on their own business trips, or internal meetings are usually tracked as staff, travel or general administrative expenses rather than entertainment and hospitality. Classifying the item correctly keeps reports meaningful and makes explanations easier in a tax audit.

Conditions for Deducting the Expense

For entertainment and hospitality expenses to be deductible from the tax base, the legislation and the tax administration's rulings highlight a few core conditions:

1. Business purpose: The cost must be directly linked to the commercial activity. You should be able to explain who was hosted and because of which business relationship.
2. Proportionate to the size and importance of the business: The amount should be reasonable relative to the company's size, field of activity and the guest's role in the relationship.
3. Not personal: Costs covering the personal needs of shareholders, managers or employees are not entertainment and hospitality expenses.
4. Documented: The cost must be supported by a document that complies with the Tax Procedure Law.
5. In line with custom: The cost should not fall outside the ordinary practice of the sector and business life.

None of these conditions sets a fixed amount. The same cost can therefore be assessed differently at two companies with different activities and scale. A solid justification and consistent records are the strongest protection against this uncertainty.

Which Documents Do You Need?

Like other expenses, entertainment and hospitality costs must be backed by the documents listed in the Tax Procedure Law:

• Invoice, e-Fatura or e-Arşiv invoice: An invoice issued in the company's name and tax number is the safest document.
• Cash register receipt: Acceptable for purchases below the invoicing threshold. Confirm the current threshold with your accounting team each year.
• Supporting note: Recording the purpose of the cost, the people hosted and the companies they represent is the most practical way to show the business link in an audit.

The story behind the document matters as much as the document itself. A receipt that says "client lunch" will not explain, six months later, who was hosted and why. Keeping meeting notes, attendee lists or calendar entries together with the expense makes the business-purpose condition much easier to prove.

VAT Recovery on Entertainment and Hospitality Expenses

Under Article 30(d) of the VAT Law, VAT paid on expenses that are not deductible when determining the income or corporate tax base cannot be recovered.

For entertainment and hospitality, this means:

• If the cost is business-related, documented and reasonable, it is accepted as an expense, and the VAT on the invoice can be treated as input VAT.
• If part of the cost is classified as KKEG, the VAT on that part cannot be recovered; that amount is also treated as KKEG.

In other words, whether an expense is deductible also decides the fate of its VAT. The two questions should be answered together, not separately.

When Does It Become KKEG?

Entertainment and hospitality costs risk being treated as non-deductible expenses (KKEG) in the following cases:

• Costs whose business link cannot be explained or whose documents are incomplete
• Personal meals, entertainment and holidays of shareholders, managers or employees
• Costs that could be considered excessive or luxurious relative to the company's scale and the importance of the relationship
• Costs for people outside the business relationship, such as a guest's family members
• Items considered contentious in practice: for example, alcoholic drinks at business meals are often treated as KKEG in the administration's assessments.

Amounts set aside as KKEG are not deducted from commercial profit; they are added back to the tax base in the return. Classifying items correctly when the expense is incurred saves time and reduces errors compared with sorting them out one by one at year end.

Bookkeeping for Entertainment and Hospitality Expenses

The Turkish Uniform Chart of Accounts has no dedicated main account for entertainment and hospitality. A sub-account is usually opened under the following accounts, depending on the nature of the cost:

Example entry: The sales team has a business lunch with a customer and pays with the company card. The invoice is issued in the company's name, and the cost is linked to the business relationship and reasonable.

• Debit: 760.xx Entertainment and Hospitality Expenses (amount excluding VAT)
• Debit: 191 Deductible VAT (VAT on the invoice)
• Credit: 102 Banks or the relevant card payable account (total amount)

If part of the cost is KKEG, that part and its VAT are tracked in a separate sub-account or in the account the company uses to follow KKEG, and added back to the base in the year-end return. Companies using option 7/A use accounts 760 and 770; those using option 7/B use the related 79X accounts. Because chart-of-accounts choices vary between companies, confirm your own structure with your financial advisor.

How to Set an Internal Entertainment and Hospitality Policy

Since tax law sets no fixed limit, the company has to draw the line itself. A good entertainment and hospitality policy usually covers:

• Who can spend: Authority is defined separately for roles such as sales, business development and senior management.
• Per-person and per-event caps: Reasonable amounts that vary by city, country and event type.
• When pre-approval is required: Hosting above a certain amount or for guests from abroad requires approval in advance.
• Mandatory information: Each expense records the guest, their company and the purpose of the meeting.
• Out-of-scope items: Costs the company will not cover (for example alcoholic drinks or personal extras) are stated clearly.
• Payment method: Where possible, corporate cards are used to reduce cash advances and after-the-fact reimbursements.

The clearer the policy, the better employees know what they can spend, and the less the finance team has to argue over disputed items at month end.

Tracking Entertainment and Hospitality Spend with Masraff

The real challenge with entertainment and hospitality expenses is not the rule itself but applying it consistently to every expense. Masraff brings the process into a single flow, from the moment of spending to the accounting entry:

• Receipt capture: The employee takes a photo of the receipt or invoice; artificial intelligence-powered document recognition fills in the date, amount, VAT and merchant automatically.
• Policy checks: Your entertainment and hospitality rules are applied as the expense is entered; limit breaches or missing explanations are flagged before approval.
• Approval workflow: Expenses reach the right manager and the finance team according to the approval flow you define.
• Corporate cards: Card transactions are matched with expenses, reducing the reconciliation workload.
• ERP integration: Approved expenses are transferred with the correct account codes to more than 20 ERP systems, including SAP, Logo, Netsis and Mikro.

As a result, every entertainment and hospitality expense sits in one place with its document, explanation and approval. When an audit or tax review arrives, the information you need is minutes away.

Frequently Asked Questions

Is there a legal cap on entertainment and hospitality expenses?

No. The legislation sets no fixed amount. The expense is expected to be business-related, proportionate to the company's size, reasonable and documented. Companies are advised to set the limit through their own spending policy.

Is a business meal an entertainment and hospitality expense?

Meals with customers, suppliers or business partners within a business relationship can be treated as entertainment and hospitality expenses. Meals attended only by employees are usually tracked as staff or general administrative expenses.

Can VAT on entertainment and hospitality expenses be recovered?

If the cost is accepted as an expense, its VAT can be recovered. VAT on the portion treated as KKEG cannot be recovered and is itself treated as KKEG.

Can a cash register receipt support an entertainment expense?

For purchases below the invoicing threshold, a cash register receipt is a valid document. Above the threshold, an invoice in the company's name is required.

Do gifts to customers count as entertainment and hospitality expenses?

Gifts that support the company's reputation, are reasonable in amount and follow business custom can be treated as representation expenses in practice. Consult your financial advisor on amount and scope.

This article is for general information. Consult your financial advisor for tax and accounting practices specific to your company.