In replies to Parliamentary questions The issue raised is that an employer is not always entitled to deduct the VAT charged on a course or training programme undertaken by an employee. The answers are, of course, also relevant in relation to other costs relating to employees.
The case study
The question concerns a crane hire company. It pays for the refresher training and certification that its staff are required to undertake every five years. Due to new data protection regulations, the organisation providing the training and certification is no longer permitted to send the invoice to the employer. As a result, the employer can no longer deduct the VAT charged on these services.
Criteria for VAT deduction
State Secretary Vijlbrief of Finance replies that VAT deduction is indeed not possible in that case. He sets out the conditions governing VAT deduction. VAT:
- must have been charged to the business owner;
- relate to services provided to the business owner;
- are listed on a valid invoice;
- are used for the trader’s VAT-taxable supply.
In the case described, these conditions are not met. It is not the employer but the employee who enters into the legal relationship with the training provider. The invoice is made out in the employee’s name and the employee pays it.
The fact that this is caused by changes to privacy legislation is irrelevant for VAT purposes. The result is that the employer’s costs increase by the amount of non-deductible VAT.