Definition of Domestic Expenditure:

Domestic expenditure refers to costs that are primarily private, personal, or non-business related. These include:

• Provision of shelter (e.g., rent or housing expenses for personal use).
• Meals and entertainment provided to employees or business owners outside the scope of business operations.
• Leisure and recreation costs that do not directly contribute to the company’s trade or business.
• Commuting expenses between home and work for employees and business owners.
• Clothing not specifically required as a uniform for work or business.

In general, these expenses are regarded as personal and non-deductible for corporate tax purposes because they do not directly relate to the production of business income.

Conditions for Allowability of Domestic Expenditure:

Section 130 of the Income Tax Act, 2015 (Act 896) provides conditions under which domestic expenditure can be converted into allowable deductions for tax purposes. These conditions include:

1. Included in Employee’s Income:
   If the domestic expenditure (such as meals, housing, or entertainment) is treated as a benefit provided to employees and is included in their assessable income for tax purposes, it can be allowed as a deductible business expense for the employer. For example, if the cost of providing lunch to employees is added to their taxable income, the employer may deduct this expense.
2. Paid by Employees at Market Value:
   If the employees reimburse the employer for the full market value of the domestic benefit (e.g., housing or meals), then the employer can treat the expense as a business transaction, and the associated cost can become deductible.
3. Non-discriminatory and Incidental:
   Expenditure that is non-discriminatory (i.e., available to all employees) and incidental in nature (such as small, infrequent, or impractical-to-quantify expenses) may also be allowable. This applies where the cost is difficult to quantify and allocate to specific employees.

Conclusion:
Domestic expenditure, typically non-business-related, can be converted to allowable deductions when certain conditions are met, such as including the expenditure in the employee’s income for tax purposes, reimbursement by employees, or when the expenditure is incidental and non-discriminatory.