The Gelderland District Court has handed down two judgements outlining the tax treatment of payments made by a foundation to its founder.
Inspirator
Both cases concern the founder and driving force behind a residential community. This residential community has the legal form of a foundation. The foundation lets out properties and receives personal care budgets (PGBs). In 2015, the foundation paid the driving force behind the community a sum of €18,000 for consultancy work, which is subject to income tax as income from other activities (row).
The Tax and Customs Administration later discovers that, in addition to this €18,000, the ‘inspirator’ also receives a monthly expense allowance of €500. The Tax and Customs Administration issues a supplementary income tax assessment, in which an additional €6,000 is taxed as income.
The person providing the inspiration must provide evidence to support their (fixed) expense allowance, as required for income tax purposes. However, income tax does not apply. The profit from other activities is calculated as the total of the allowances received, less the business expenses actually incurred. The Court concludes that the instigator has not provided sufficient evidence that he actually incurred the costs, with the result that they are not eligible for deduction. The additional assessment remains in force.
Donation
In 2016, the foundation paid the ‘inspirator’ €220,000. The inspirator’s adviser notified the Tax and Customs Administration (Gift and Inheritance Tax Team) in 2019 that this constituted a gift made in fulfilment of a natural obligation (such a gift would not be subject to gift tax). As the adviser also states that the gift relates to work carried out in the past, the Tax and Customs Administration argues that the €220,000 must be subject to income tax for the ‘inspirator’ as income from other activities.
The Court is of the opinion that this does not constitute a source of income, but rather a gift. The additional income tax assessment for 2016 is therefore, of course, set aside. However, in another case the court draws the logical conclusion that the €220,000 is therefore not deductible for the purposes of the foundation’s corporation tax, meaning that the additional corporation tax assessment for 2016 imposed by the Tax and Customs Administration must stand. Unfortunately, it is not apparent from the proceedings whether the Tax and Customs Administration has claimed (or subsequently claimed) gift tax in respect of the donation received.