Mixed bag: declaring business costs

Enjoyment might not be a crime, but it is relevant when you are totting up costs for your business. Under Dutch tax law, certain bills that might be to your private benefit are not fully deductible.

In the Netherlands, these are described as mixed expenses, or ‘gemengde kosten’ and they generally involve travel, food and drink – which, if you are lucky, you might have enjoyed too.

As a tax adviser, we see that a lot of people are confused about their mixed expenses, or so-called representation costs – which are often mislabelled. In general, we are talking about food and drinks, the expenses of going to a congress, seminar or study trip, and gifts to your clients.

There are two systems that you can use: you can either choose not to include a certain percentage as a deduction from your business income, or a certain fixed sum – so, for example, if you are in a job where you spend a huge amount of time on the road and entertaining, it would be to your benefit to discount a fixed sum and then expense everything else. But if your job involves less travel and entertaining, a percentage basis will be better for you.

Small business

A freelancer or small business can in general deduct 80% of costs that are considered mixed expenses (or you can choose to deduct everything after paying the fixed sum of €4,800 – which is to your benefit if you spend more than €24,000 a year on business travel, food and drink).

If you are travelling to a congress or event that is directly related to your business, then you will be able to deduct 80% of your costs for travel, food and drink (including your own meals) under this tax ruling.

Be aware, though, that if you are simply travelling to meet a client, it’s better to do this outside of a conference, because then 100% of your travel costs will be deductible. Note that if the conference is not strictly speaking essential, but perhaps linked with future business hopes, then there’s a limit of €1,500 a year for deductible travel and accommodation costs.

Regarding VAT, many people are unsure: the 80% is for costs including VAT because under Dutch VAT law, you cannot claim anything back for food and drinks. At Blue Umbrella, this is one of the most common mistakes we see!

Businesses (BVs)

There are different limits if you have a BV limited company. In this case, for similar mixed expenses, you can deduct 73.5% of your costs from your income in 2022.

Alternatively, you can choose to forfeit a fixed sum of €4,800 and then claim all costs (something that is to your benefit if your business spends at least €18,113 on these mixed costs each year).

A recent tax ruling in Amsterdam has confirmed that daily reimbursements for employee subsistence fall under the expenses ruling rather than wage tax.

There are strict rules in the Netherlands about what does and does not count as a business expense, so if you are confused, seek personal advice.

Our team at Blue Umbrella can help via www.blueumbrella.nl/contact