Temporary 100% deduction for reception costs
For income tax purposes, reception costs are 100% deductible until 31 December 2020. This measure should support the event sector. However, the question is whether the strict rules regarding events will make it possible to organize such events after all.
Publicity costs versus reception costs
In VAT matters, distinction is made between reception costs and publicity costs. Reception costs are mainly focused on existing relations (customers or suppliers) whereby the goal is to make the reception of these relations as pleasant as possible. As an example, costs of an open day are considered as publicity costs. The difference? VAT on publicity costs is fully deductible, which is not the case for VAT on reception costs.
For income tax purposes, reception costs are always 50% deductible. Traditionally, the tax authorities look at the nature of the expenditure, and not so much at the reason of the event. But in 2018 the minister answered a parliamentary question on the difference between VAT and income tax and according to him the VAT approach should also be applied for income tax.
Court of Cassation
Also, the Court of Cassation received this question in 2019, but the Court found, as do the tax authorities, that one should not look at the goal of the expenses, but at the nature. The party tent you rent for the reception for existing clients or for an open day? It is always a reception cost with a 50% deduction.
The tax authorities follow this strict vision and the current minister of Finance confirms this view.
The Corona III-law foresees in a 100% deduction for reception costs made between 8 June 2020 and 31 December 2020. By doing so, the legislator wants to support the event sector.
Note: this relaxation only applies for income taxes and only to reception costs. Nothing changes for VAT. And other expenditure, such as promotional gifts, remain subject to the 50% limitation.
At the restaurant
For some time, it was announced that the 100% deduction would also apply to restaurant expenses. For income tax purposes, such expenses are deductible for only 69%. However, there was no such relaxation.
On the other hand, the Corona III-law foresees in a tax exemption for the so-called consumption cheques. Who receives such cheques can spend these in the catering sector, in cultural shops, sport clubs and certain retail shops.
The initiative to offer such consumption cheques lies in principle with the employer. These are not only exempt from social security contributions, but also from income tax. The maximum amount an employer can grant is 300 euro.
Most tax aid measures run until end of 2020. But the question is whether this is long enough? It is also the question whether the state of the treasury will allow to prolong the measures.