Gelderland District Court recently ruled that football matches attended by a director-major shareholder (DGA) were rightly taxed as wages. As so often in this case, evidence proved crucial.
3 questions
Whether expenses incurred by an entrepreneur qualify as deductible expenses must be determined on the basis of the following questions:
- Was the expenditure incurred for a business purpose?
- Does the expenditure also involve a private purpose?
- Would a reasonable-thinking entrepreneur have incurred the expenditure to the same extent?
For the first question, the burden of proof is on the entrepreneur. For questions two and three, the burden of proof is on the tax authorities.
Season tickets
The case concerns a BV, which holds all the shares in a BV in which a cleaning company is carried out. The Cleaning BV deducts the expenditure for 2 season tickets for Ajax from its profits, as well as the expenditure for 22 tickets for an Ajax European match.
The Tax Office imposes a retrospective payroll tax assessment on the BV for the (seasonal) tickets paid by the Cleaning BV, arguing that they are wages in kind for the BV's DGA.
The BV (and the DGA) argue that the (seasonal) tickets are acquisition tools to take potential customers to matches or give them the opportunity to attend matches. Moreover, they argue that the DGA gains new contacts during matches at the stadium, which develop into new sales. They then argue that the tax authorities must make it plausible that there is wage in kind.
However, the Court ruled that the BV did not substantiate its claims in any way with documentary evidence. Literally, the Court considers: “It is a fact of common knowledge that attending football matches is largely recreational in nature. The court therefore holds that employees, if they attended a match, attended it for their own personal satisfaction of needs. It is then for the interested party to make plausible facts and circumstances from which the business nature of the provision follows.”.
Pleading position?
According to the court, the BV did not provide any evidence to support its assertions. In response to the BV's claim that it had taken a pleading position, the Court considered: “Measured by objective standards, the interested party could not believe that the tax classification it gave to the provision of the cards, namely that there was no pay, was correct. This is all the more true as the interested party did not in any way record for what purpose and by whom the cards were used.”.