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VAT on costs of lodging, food and drinks made for publicity purposes is deductible

In respect of the exclusion of the deduction of VAT for reception costs, the VAT authorities had already said that they would follow the case law of the Supreme Court. Back then, the Court confirmed that entertainment costs made for the promotion of certain goods or services must be considered as publicity costs with a strictly business character. According to the Court, such costs cannot be considered as reception costs and do not fall within the scope of the exclusion of the VAT deduction.

Specifically for the VAT on costs of lodging, food and drinks, the VAT authorities used to refuse the deduction in principle. However, in their recent decision, the VAT authorities ultimately follow the case law of the Supreme Court. If the costs are made in the context of an activity which mainly and directly aims to inform potential clients about the existence and nature of a product or service with the purpose to promote the sales, those costs are publicity costs and the VAT is fully deductible.

However, the VAT authorities add that the taxpayer, on a case by case basis, must provide the necessary proof thereof. In order to successfully claim the VAT deduction, it is therefore important to sufficiently document the publicity character of the event. There are also opportunities for the past: taxpayers can claim the historical VAT through the VAT return, taking into account the three-year statute of limitation.

 

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Jos Goubert
Director

Tax Knowledge Dept.
Brussels

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