The deduction of business expenses
Business expenses that you incur for your company are tax deductible. The Tax and Customs Administration means business costs, costs that are necessary within reasonable limits for the conduct of your business and that relate directly to your business. Business costs that you as an entrepreneur can deduct from your income include:
- Lease of business space
- Cost for stationery, envelopes, business cards, etc.
- Costs for Expenditure for the furnishing of your office and building
- Insurance costs
You must add any reimbursements that you have received for the costs of your income. If expenses are a business and personal nature, only the business part is deductible.
Because certain assets last for a number of years, you may not deduct all costs in the year of purchase. You must write off instead. This means that you divide the costs over the years in which you use the business asset. You can therefore deduct part of the costs each year. The limit is € 450. You can deduct assets less than € 450 in one go.
How does the Tax and Customs Administration check deductible items?
The Tax and Customs Administration checks the motive with which you incurred costs in the case of business expenses. If it is clear that you have incurred the costs in full for your company, the Tax Authorities will accept these costs as a deductible item. As an entrepreneur you are free to determine what costs you incur for your company and how much. The Tax and Customs Administration may, however, test if the relationship between costs and business interests is out of step.
Deduct VAT as input tax
If you incur costs for your company, you will find VAT on the invoices of your suppliers. As an entrepreneur, you can deduct this VAT (input tax) from the VAT that you owe to the Tax Authorities. In your administration you keep track of how much VAT you have charged your customers and how much VAT you have paid on your business purchases. In the VAT return you can deduct the VAT paid from the VAT that you owe on your turnover.
Special rules apply to, among other things, expenses in the hotel and catering industry and the purchase of a car.
Expenditure in the hospitality sector
You cannot deduct VAT for food and drink for yourself, staff or business relations just like that. For example, if eating and drinking is consumed in a catering facility or provided by a caterer in a specially equipped room, you may not deduct the VAT on this. If this is not the case, special rules apply and you can deduct limited VAT on the costs and purchase thereof.
A car: business or private
If you buy a car that you want to use for both business and private, you have to choose whether or not to include it in your business or private assets. Do you fully include the car in your business assets? Then you can deduct the VAT on the purchase, maintenance and use as input tax, insofar as you use the car for taxed sales. Do you or an employee use a company car privately? Then you have to pay VAT on this private use. Is the car (which belongs to your private assets) also used for business purposes? Then the VAT on maintenance and use can be deducted.
Do you want to know more about deductions and VAT? Please contact us.