The Dutch Decree on the Exclusion of VAT Deduction (‘BUA’)
The Decree on the Exclusion of VAT Deduction (‘BUA’) is the most common way of correcting the deduction of VAT on costs incurred by a business but which are also of a private (consumption) nature. However, this often concerns costs that are primarily incurred in the interest of the company and for which the personal benefit for the employees, if any, is of minor importance. For these costs the BUA makes an exception and a correction is not necessary. We see a tendency in case law revealing that, in certain cases, the Dutch Tax Authorities have been too quick in excluding deductions as soon as an employee's private benefit is identified. The Dutch Supreme Court, however, primarily looks at the necessity for the company to incur these costs and considers whether special circumstances force the entrepreneur to purchase the certain goods or services, while a third party, such as the employee, can also benefit at the same time. Therefore, it is important for you to properly substantiate the business interest in each situation when making a VAT deduction on such costs.
Business seats
A good example is the case in which the Supreme Court ruled that the provision of business seats to business relations and staff can be business-related and therefore falls outside the scope of the ‘BUA’. You can therefore usually deduct VAT if you can make it plausible that the attendance at the event for which you have business seats took place with (potential) business relations. The Tax Authorities will then need to be able to gain an insight into who has used the business seats.
Company pension scheme
Another example is a pension scheme for staff. This is not a personnel provision provided by an employer as referred to in Article 1(1)(c) of the ‘BUA’. It is not important whether this is done in-house or by setting up a legally and fiscally separate entity. There is also no question of business gifts or other gifts within the meaning of Article 1(1)(b) and (2) of the ‘BUA’.
Other examples
Some other examples of costs, if they are subject to VAT, to which the ‘BUA’ does not apply, are:
Costs of outplacement;
Costs of a health and safety service (Dutch: arbodienst);
Costs of courses with a strictly business character;
Private bus transport within the meaning of the Passenger Transport Act (Dutch: Wet personenvervoer) for group transport of employees to the workplace;
The provision of parking facilities at the office;
- Costs of workwear;
- Providing vouchers to employees under a scheme designed to show appreciation for and reward the best and most productive employees (as in Case C-607/20 of 17 November 2022, GE Aircraft Engine Services);
- Costs of massages performed to eliminate or reduce stress-related complaints at the workplace.
Determining the ‘BUA-correction’
If an entrepreneur or employer charges a reimbursement for one of the aforementioned benefits in kind (such as business gifts, gifts, staff housing, wages in kind, sports facilities for staff) he must pay the VAT on this contribution to the Tax Authorities. If this reimbursement is higher than or equal to the costs of the private use, no ‘BUA-correction’ needs to be made for this employee benefit. If the reimbursement is lower, the ‘BUA-correction’ is calculated over the difference between the costs and the net reimbursement. Also if the employee contribution ( reimbursement) consists of sacrificing holidays or working time reduction days (Dutch: ADV-dagen), the employer must pay the VAT on this reimbursement in the relevant VAT return.
If costs are incurred for services that are partly business-related and partly private in nature, the ‘BUA correction’ is applied proportionally. For example, the mobile phone made available to staff is only considered wages in kind in proportion to the private use. Only this part should be subject to a ‘BUA correction’.
Threshold 227 euro
No correction below 227 euro per beneficiary per financial year
The deduction will not be excluded (corrected) if the total value of the benefit(s) covered by the ‘BUA’ is 'minor'. This means that the deduction right is maintained in the normal way if the value of the benefits in kind (business gift, gift, or employee benefit) in a financial year does not exceed 227 euro (excluding VAT) per beneficiary (business relation, institution, employee). If the value exceeds this limit, the deduction for benefits in kind for that individual will be corrected in its entirety. ‘Value' should be understood as the acquisition cost, cost price or production cost, excluding VAT. For goods that are normally depreciated, these costs are spread over a period of five years for movable goods and ten years for immovable goods.
The BUA specifies how to calculate whether the threshold amount of euro 227 is exceeded.
The Dutch tax authorities' website currently indicates that the amount of a personal contribution to be paid (ex VAT) for personnel benefits, business gifts or other gifts may be deducted from the total of the expenses that are tested against the threshold. If the expenses fall below the BUA threshold amount in this way, the entrepreneur may deduct the VAT on the expenses. Based on this policy, a preference for an employee with a total value of euro 250 euro, whereby the employee pays a personal contribution (ex VAT) of euro 25, should not lead to a BUA correction. However, according to the Secretary of State, this deduction of the personal contribution is a policy that is strictly speaking broader than the BUA. The explanation on the Tax Authorities' website will therefore be terminated with effect from January 1, 2024. The old rules still apply to the VAT correction for 2023. For companies that have a fixed methodology for VAT corrections, this methodology must be adjusted if necessary in 2024.
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