Zeeland-West Brabant District Court ruled that a BV could not deduct costs for business succession advice from its profits.
Personal needs
The Court considered that expenses are not business expenses if and to the extent they were incurred to satisfy the personal needs of the shareholder. Consultancy expenses related to business succession are in principle not business expenses, but are related to the personal needs of the shareholder(s). Indeed, the schemes related to business succession concern the shareholders, who may benefit from a tax advantage.
In specific cases, consultancy fees may well be business-related. This was the case, according to the Supreme Court, in respect of costs incurred in conducting proceedings on an income tax facility relating to a merger in the business interest. Those proceedings also served the business interest of the companies involved.
Burden of proof
The burden of proof to show plausibly that expenses are business expenses rests on the company seeking to deduct them.
That burden of proof is not met in this case. The court considered that shareholders chose for private reasons to transfer only about 25% of the ordinary shares to the children. Control, in the form of preference shares, remained with the parents. The court also considered that of the 4 children, only 1 was employed by the company.
Considering the company's asset and profit position, the court did not see why the continuity of the business would have been jeopardised if the business succession allowances had not been applied. In this context, the company had argued that the tax owed by the children should be withdrawn from its assets by paying dividends.
The District Court delivered its judgment on 18 August 2025. Therefore, the deadline for appeal is still pending.