The VAT charged on the consumption of drinks and food is not deductible in many cases. Not even if the consumption takes place on undoubtedly entirely business occasions.
Hospitality VAT not deductible
If the drinks and food are consumed in a catering establishment, Section 15(5) of the Turnover Tax Act excludes VAT deduction in all situations. If food and beverages are consumed at or near the workplace, then limitation of VAT deduction under the BUA (Sales Tax Exclusion Decree) is applicable.
Exclusionary Deduction Order (BUA)
The North Holland District Court recently confirmed this in the case of a firm with lawyers, notaries and tax specialists, which requires its employees to attend professional meetings and courses during lunch breaks and outside office hours. The employer then provides a (simple) meal (sandwiches with toppings), which is served in the meeting room where the meeting takes place.
The court ruled that whether the provision is of a business or personal nature is irrelevant here, as the BUA provision specifically applicable to the provision of drinks and food does not make this distinction.
Of course, the BUA threshold does apply. Only when the total of BUA allowances in a year per employee exceeds €227 must the deduction of VAT on BUA allowances be reversed.
Working expenses scheme
Confusion still sometimes arises in practice because in the working expenses scheme (wage tax) more than incidental business meals targeted are exempt. Meals during professional meetings and courses undoubtedly qualify as more than incidental business.
For no more than incidental business meals, a flat-rate valuation of €3.20 per meal applies under the work-related costs scheme.