Business expenses are deductible from business profits. But does that also apply to entertainment expenses (food and drink)?
Cost of accommodation
This matter is being heard at the Zeeland-West-Brabant District Court in the case of a consultant. He runs his business as a sole trader.
The work will be carried out over a period of six months at a considerable distance from the consultant’s place of residence. He will therefore rent a room in the town where the work is being carried out, where he will stay whilst carrying out the assignments.
The Tax and Customs Administration is conducting an audit and agrees that these costs relating to temporary accommodation are business-related. The rent for the room may be deducted from the profit.
Digest
The situation is different when it comes to the cost of meals during the stay in the rented room. The consultant argues that, as the stay is for business purposes, the meals are also business expenses. Another argument in favour of the business nature of the costs is that the consultant does not do the shopping, cooking or washing themselves, in order to have more time to carry out the assignment and for self-study.
The court ruled that subsistence expenses are not business expenses, as these expenses are predominantly of a private nature. Temporary accommodation costs arise because the assignments are carried out elsewhere. By contrast, subsistence expenses are also necessary even when the consultant is not staying elsewhere. The fact that there may be a business-related reason for not doing one’s own shopping, cooking and laundry does not detract from this predominantly private nature.
The fact that the audit did accept the meal expenses incurred during hotel stays does not, according to the court, detract from this conclusion.
Employee
The comparison with an employee does not hold true. This is because, by virtue of the contractual (employment) relationship, the employer is obliged to reimburse the employee’s expenses. According to the court, this situation is fundamentally different from that of the entrepreneur himself.
Deduction limit
The deduction of expenses for food, drink and luxury items (consumables) is subject to limits under income tax law. These expenses, together with expenses for hospitality, conferences and similar events, are not deductible up to an amount of €4,700 (or up to 20% of the actual costs).
However, this deduction limit naturally only applies if the costs are business-related.