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I Charged a Non-Deductible Expense to the Business, What Can I Do?

It's crucial to maintain a clear distinction between your business and personal finances for accurate accounting and tax reporting. Non-deductible expenses, such as personal purchases like meals, drinks, clothes, or other non-business-related items, should not be charged to your corporate account. Adhering to this practice ensures financial transparency and compliance with tax regulations.

What should I do if I've charged a non-business related expense to my corporate account?

If you find that you've mistakenly charged a non-deductible expense to your corporate account, don't worry—there are steps you can take to address the situation:

Refund the Money to the Company:
- Initiate a transfer from your personal account to refund the amount charged to the corporate account. When making the transfer, include the concept "Refund for non-business expense on DD.MM.YYYY" to document the transaction clearly.

Declare the Expense as Non-Business Related:
- If a refund is not feasible, the expense can be declared as "non-business related." Keep in mind that this incurs a tax liability.
- The tax liability amounts to 25% of the net value of the purchase. In other words, the business will pay 25% of the expense's total value in taxes.

Choose the option that best suits your situation and ensures compliance with accounting and tax regulations. Keeping accurate records and following proper financial practices will help you navigate such situations effectively and maintain the financial health of your business.

Updated on: 26/02/2024

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