Is a business owner entitled to deduct the VAT that increases the cost of accommodation for foreign workers?
BUA
The BUA (Decision on the Exclusion of VAT Deduction) stipulates that the following is not deductible: the VAT that weighs on staff accommodation. So the answer is: no.
But ….
Supreme Court
The Supreme Court decided in November 2020, with reference to the Fillibeck judgment of the Court of Justice, which states that this deduction is nevertheless permitted provided that two conditions are met:
- the provision of accommodation for employees is necessitated by the specific needs of the company, and;
- Employees are not given the option to choose their own accommodation or to share it with one or more other people.
In the context of the employer’s business having specific needs, it is important to consider whether there are circumstances that make it necessary to recruit staff from abroad.
Court
The Zeeland-West Brabant District Court has applied the Supreme Court’s criteria in a case involving a temporary employment agency that supplied foreign agency workers to its clients. The agency provided accommodation for these workers in the form of homes in holiday parks and B&Bs. The agency workers did not contribute towards the costs of this accommodation.
The Court has allowed the deduction of VAT and appears to consider it significant that the employer is not obliged to arrange the accommodation, and that the employees do not contribute to the costs of the accommodation. The employees are free to decline the accommodation offered, but have no say in who they have to share the accommodation with.
The Court considers it plausible that the situation on the Dutch labour market is such that the employer must seek foreign workers. The Court deduces this from the fact that the foreign workers receive the same pay as Dutch workers would receive and that the costs associated with the foreign workers are higher due to accommodation costs.
Clarity?
Does this ruling provide complete clarity on this legal principle? Unfortunately, not yet. It is obvious that the Tax and Customs Administration will lodge an appeal against the court’s ruling. If only to await the ruling in the referral case arising from the aforementioned judgment of the Supreme Court.
Furthermore, the ruling raises the question of whether the outcome would have been different had the foreign workers paid a contribution towards their accommodation.