When your company puts a pleasure house at the disposal ...

Although you would expect that all expenses a company makes are deductible professional expenditure, the tax authorities can disallow such expenses because the company has no professional intentions with them. Putting a house at the disposal of staff or directors is such a controversial case.

A house in a company

When you buy a house as a private individual, you do not have much tax deductions: you cannot depreciate the building, you cannot deduct maintenance costs. Best case, you can have a tax deduction when you have a mortgage loan.

On the contrary, companies do have these deductions (e.g. investment deduction for a loan, depreciations,  ..). At least when the company has the intention to acquire professional income with these investments and expenses.

Expenses are only deductible when they meet certain conditions. You should be able to prove them. They should be legal. And there is also the intentionality condition: you made the expenses in order to obtain professional income. This goes for both individuals and corporations.

If you buy the house you live in via your company, there is a good chance that the tax authorities will disallow these expenses since the company does not wants to obtain income with this purchase, but only wants to grant you a benefit.

If your house is your salary

Salary for directors or staff is a deductible professional expense, no doubt about it. There is also case law stating that the expenditure made by a company in order to provide a taxable benefit in kind to its director or staff, is deductible. Let's think about the company car, cell phone, .. The company provides these benefits as a remuneration for labor services. Hence as salary. And subsequently these costs are deductible.

A house is financially clearly of another size than a cell phone, but the line of thinking goes also for your company putting a house at your disposal as a compensation for your labor services;  you pay taxes on the benefits in kind and the costs related to the house are deductible.

That's the theory, but the tax authorities make it quite difficult in these situations. In most cases they reject the deduction because the taxable person cannot prove that the house is put at the disposal in return for effectively provided labor services. If you indeed obtain a salary, and suddenly you receive free housing, then the proof is a lot harder to provide.

Pleasure houses

Don't get carried away: pleasure houses in the tax sense are immovable goods where a company can invite its staff or customers in order to stay there, such as hotels and holiday houses.

The article on professional expenses states that such expenses are only deductible when they were made in order to obtain professional income. But for certain expenses the law foresees that they are not deductible. Hunting and fishing expenses or expenses for pleasure boats are never deductible. And also pleasure houses are in the list of disallowed expenses.

But in tax matters the words 'always' and 'never' not really exist... there are exceptions. It is evident that e.g. a distributor of pleasure boats has expenses related to please boats .. which are deductible.

These disallowed expenses are also deductible when they are included in the taxable salary of the staff or directors which benefit from the advantage. In case a company provides the use of a pleasure boat, the expenses are deductible ... when a benefit in kind is taxed in the hands of the staff.

This seems the same as described above for a house, but there is one difference: in the last legal article on pleasure boats and pleasure houses nothing is mentioned about the link between the expenses and obtaining professional income. There is mentioned that in case a taxable income is reported in the hands of the beneficiary, there is automatically deductibility in the hands of the provider of the benefit in kind.

So when I have the use of a holiday house which belongs to my company, I only have to pay taxes on the benefit in kind and deductibility for the company is OK. But if I obtain the use of a normal house where I have my principle place of dwelling, I should prove that there is an actual service for which I am compensated. And that is discrimination.

Also for holiday houses the normal rules apply

The Constitutional Court was recently confronted with this question and they don't see the problem. Or in other words, they make a reasoning according to which there is indeed no discrimination. According to the Court, contrary to what the tax payer states, there is no automatism between the taxable income linked to a holiday house, and the deductibility of the expenses. The intentionality condition remains applicable.

Also for holiday houses and hotels you have to, next to the fact that it generates a taxable benefit in kind, prove that there is a link between the benefit and the services you provided. And that proof is, both towards the tax authorities and the courts, not that simple.

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