The North Holland District Court considers that the evidence provided by a business owner to substantiate the business-related nature of the expenses incurred is insufficient.
Which expenses are tax-deductible?
Case law is clear on this point: a business owner who classifies expenditure as costs deductible from their profits must prove that such expenditure was incurred in the interests of the business. If he or she has succeeded in providing such proof, the Tax and Customs Administration may only scrutinise it to a marginal extent. This means that the Tax and Customs Administration may not question whether the business expenses are also justified. The tax authorities may, however, still attempt to demonstrate that the expenses are partly intended to satisfy the entrepreneur’s personal needs and/or that a reasonable entrepreneur would not have incurred the costs to this extent.
Champagne
The case before the court centres on the evidence that the expenditure was incurred in the interests of the company’s business. The case concerns a holding company that holds shares in an accountancy firm. The holding company claims a deduction of over €7,000 for expenditure on champagne and other bottles of alcoholic drink. The court ruled that the holding company, by providing only a general description of the (use of) these items as gifts for business contacts, had failed to sufficiently substantiate that the expenditure was sufficiently business-related.
The interested party’s argument that, given his state of health and long working weeks, it is not plausible that he consumes the alcohol himself is not relevant to the question of whether the expenses are business-related.
Dinner costs
With regard to the expenditure of over €¤14,000 on dinners charged to the profit and loss account, the business owner has been able to demonstrate, in respect of approximately € 5,000, that these were business expenses. This amount has therefore been accepted by the Tax and Customs Administration as a deductible expense. As regards the remaining dinners, the brief handwritten notes on the receipts were insufficient to demonstrate that the meals were of a sufficiently business-related nature. According to the Court, the deduction of these expenses was rightly refused.