2023-09-09 03:10:14
The Court of Appeal of Ghent has handed down a judgment concerning a company which places real estate at the disposal of its manager. The company does not have to prove the manager’s services to justify the deduction of costs.
The provision of a primary or secondary residence to a business manager is a source of numerous disputes. The tax administration is wary of the deduction of real estate costs as professional expenses of the company. The actual expense deduction stands in stark contrast to the tax paid by the executive on the benefit. In fact, for personal income tax, a flat rate benefit in kind – lower – is imposed.
“According to the Court of Appeal, the tax administration illegally interfered in the remuneration policy of this company.”
Remuneration
Thierry Lauwers, tax lawyer, explains that “the usual argument of the tax authorities is that the additional remuneration through real estate must be justified by an event in the life of the company, such as additional services from the manager. There must therefore be services which are not paid in cash. It is not uncommon for the company to also be asked to have a documented salary policy.”
A ruling handed down on September 5 by the Ghent Court of Appeal overturns this argument. In this case, a company of doctors had granted accommodation to its manager. “According to the court, the tax administration illegally interfered in the remuneration policy of this company. It is sufficient to demonstrate that the company wanted to pay for real services with the property,” explains Maître Lauwers.
Proportionality
The ruling could set a precedent. “This is the first time that the Court has emphasized that it is not necessary to put forward elements to demonstrate the amount of the benefits in order to justify that they are proportional to the remuneration,” declares Maître Lauwers.
The whole discussion is about compensation theory. Expenses incurred by a company are deductible as professional expenses provided that they were incurred to provide the director with a benefit in kind, such as the provision of real estate, if this benefit corresponds to services actually provided by the administrator.
Means of proof
“The court emphasizes that the company can prove by all legal means of proof, except the oath, that the costs of the real estate comply with the theory of remuneration and that these, through the benefit in kind provided, remunerate the real services rendered by the director to the company”, he continues.
The court refers in particular to the annual accounts which were approved, in which the benefit in kind was explicitly recognized as remuneration in the income statement as well as to the minutes of the general meeting approving these accounts and the fees which are registered there.
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