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Tax issues related to business meetings on ships

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This data is being provided for information purposes only and should not be regarded as tax or legal advice for your reliance. Always consult your tax advisor regarding your specific tax situation


Over the past several years, there has been an explosion in the popularity of conducting business meetings and conferences at sea on cruise ships. Indeed the cruise industry has responded by building cruise ships with meeting and conference facilities that rival land based venues. The cost efficiency of meetings at sea versus land-based venues has caused the meetings at sea business to soar.  The dollar differences can be substantial when considering all of the inclusions in a cruise ship meeting package that you typically pay extra for at a land-based venue. On a cruise ship, your meals (all you can eat) and onboard entertainment, meeting rooms and AV equipment are included in your cruise fare. This makes the price very reasonable compared to separately paying for items on a land-based venue.  Furthermore, because these items are not separately stated, it makes them 100 % deductible versus 50% deductible when listed separately at a land-based venue.

IRS Code subsection 274 (h) provides specific guidelines with respect to the deductibility of foreign country meetings (which include foreign flagged cruise ships). Under these guidelines, no deduction is allowed for expenses allocable to a meeting held outside the North American area, unless the taxpayer establishes that the meeting was directly related to the active conduct of his or her trade or business and that after consideration of various relevant factors, it was -as reasonable- for the meeting to be held outside the North America area within it. If a meeting program is held within North America than the meeting can be tax deductible.  The term "North America area" refers to the United States, its possessions (Puerto Rico, Guam and the U.S Virgin Islands), the Trust Territory of the Pacific Islands, Canada and Mexico.


If the meeting program is held on a Foreign Flagged Cruise Ship then the meeting is normally not deductible by the company. There are however, two scenarios for dealing with this rule in a way that meets IRS regulation which is discussed below.

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The Decision -

By Land or by Sea?

In deciding whether to conduct a meeting at sea on a cruise ship, some questions a business needs to consider are:

  • What type of venue will attract a larger audience and leave participants feeling energized and,
  • Which venue will provide greater value to both the conference organizer and attendees in terms of both investment and quality.
  • Is the decision driven by a tax deduction for the event?

The first rule of thumb is that a good business decision should always be made on the basis of what makes the most economic sense for the company. If a tax deduction sounds appealing, it is important to make sure the benefit of any deduction exceeds the costs of not taking the deduction. The large and growing number of meetings at sea on cruise ships clearly illustrates that many companies have found the benefits and costs savings significantly outweigh the potential tax deduction and elect ships over land-based venues.



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