If the business owner pays or supplies items, those costs are deductible from profit if you put them into a work-related expense chart (WKR). But what about mixed costs? The Amsterdam Court of Appeal recently discussed this.
Mixed costs include food and drink costs, stimulants, entertainment costs, conference and seminar costs, and the like. Due to their partial special nature, these costs are only partially deductible.
Discounts are limited
The deduction for these costs is limited to 80 percent for companies in income tax, and 73.5 percent for companies in corporate tax. Entrepreneurs can also choose not to deduct a fixed amount, rather than a percentage, if this is more beneficial.
Wage costs are 100 percent deductible
Labor costs are 100 percent deductible. But what if these wage costs consist of mixed costs, like a meal?
Taxable, then deductible
In the condition you played for Amsterdam Court of Appeal The court ruled that wage costs are 100 percent deductible only if tax is actually paid on that wage. This could be a wage tax if the allowance is taken into account as a wage on the employee’s salary slip. But it can also relate to wages set by the employer for a system of labor-related costs which are taxed at 80 percent of the final fee if the vacancy is exceeded.
Neither of these was the case in the case in question, because the drivers’ meal allowances were included in the free space of the work-related costs chart and did not exceed the fixed amount. It is for this reason that drivers have not paid any tax on it, and thus the costs were partially deductible, according to the court.
The court ruled that:
It has been established that the business owner has identified daily allowances as the final tax element. Moreover, it is not disputed between the parties that the wage tax was not actually paid on the overnight allowance.
In essence, the dispute boils down to the question of whether the day-to-day allowances that an employer gives to its employees are costs as indicated in Article 3.15, first paragraph, IB Code (Limited overhead cost deduction).
As far as the daily allowances relate to costs and fees related to food and drink, the court answers this question in the affirmative.
Therefore, the Court of Appeal does not follow the employer in his argument that the daily allowances seek to compensate the costs of their employees on the road for meals and other consumptions, since the change (extension) of the concept of wages Section 10 LB Act As of January 1, 2011, they are not included in the costs referred to in Article 3.15, first paragraph, of the Income Tax Law.
The restriction of cost deduction is unchanged
According to the Court of Appeal, there is no reason to assume that the legislator intended to amend the concept of wages in Article 10 of the Wet LB Law, and the expense allowances that fall within the scope of Article 3.15, Paragraph 1, Wet IB prior to this amendment, as this change will not be covered any longer, until Had those allowances been included in taxable wages from 2011 onwards.
By introducing the business-related expense scheme, the legislator did not intend to introduce a change in terms of limiting the expense allowance. Thus, the fact that the disputed daily allowances are part of the taxable wages, does not mean that these allowances, insofar as they fall within the provisions of Article 3.15, Paragraph 1, of the Income Tax Law (this relates to “food” and “drink”), Fall outside the discount limit in Article 3.15 Wet IB.
Difficult to implement
The case has yet to be evaluated by the Supreme Court, so the question is whether the appeals court ruling will still stand here. It is challenging to implement, for example in situations where both 100 percent deductible costs (such as a birthday package) and limited deductible costs (such as meals) are absorbed in the free space. After all, it is unclear afterwards how the free space should be allocated to the related costs and what is the reduction in the profit discount that this leads to.