Not all business expenses are fully deductible from profits. How do these deduction restrictions apply to daily allowances that an employer is obliged to pay under the collective labour agreement?
Not deductible
The following (among other things) are not deductible from profit: all costs relating to the maintenance of a certain status and to vessels used for representative purposes.
Furthermore, almost all fines and other costs relating to criminal offences are not tax-deductible.
Limited deduction
For 80% (for income tax purposes) or 73.5% (for corporation tax purposes), the following costs are deductible from profit:
- food, drink and stimulants;
- representation;
- conferences, seminars, symposia, excursions, study tours and the like.
These percentages apply if you choose to adjust your figures on the basis of actual costs. If you do not do so, €4,700 in expenses will not be deductible for income tax purposes. For corporation tax purposes, this is the higher of 0.4% of the total wage bill or €4,700.
Pay
Wage costs are, of course, fully deductible. This also applies to the partially deductible costs mentioned above, provided they are included in the employee’s wages. To Amsterdam Court of Appeal The question raised was how the deduction limit should be applied in relation to daily allowances.
The case concerns a transport company with a total wage bill of over €24 million. The deduction limit of 0.4% therefore amounts to approximately €96,000. The transport company wishes to apply the deduction limit to the actual mixed costs. In doing so, it excludes the daily allowances paid to the drivers. These allowances must be paid to the drivers under the terms of the collective labour agreement. They are intended to cover the costs incurred by the drivers whilst on the road for meals, other refreshments and toilet facilities.
The transport company has designated the daily allowances for the purposes of payroll tax as “final-withholding wages’. This means that the allowances are specifically exempt. By virtue of an approval, they fall under the exemption for costs relating to “temporary stay in connection with employment“. See also our article Subsistence allowances transport sector
The Court has ruled that the allowances are only excluded from the restriction on the deduction of expenses if they are actually subject to payroll tax. As the targeted exemption applies, this is not the case.