Tax deductions must be properly substantiated, even when they form part of the business profit. This did not go well in four cases matters in which the Zeeland-West-Brabant District Court recently ruled.
Write-down
The cases concern a general partnership (VOF) with four partners. In 2016, the general partnership made a profit of €224,262. The partners then deducted an extraordinary expense of €363,123 from this, thereby turning the profit into a loss.
This deduction relates to a revaluation of stock (€226,336) and a write-down of trade receivables (€136,790).
Substantiation
Until 2016, the stock had been estimated. To substantiate the write-down, the general partnership provided a list setting out the write-down for each product. The court ruled that this list was very brief. Furthermore, the write-downs listed were not substantiated.
The partnership based the write-down of the receivables on an assessment of the likelihood that the debts would still be paid. This assessment is based on the relationship between the partnership and the debtors in question.
The court has ruled that the Tax and Customs Administration was right to refuse both deductions.