25 September 2020
According to Belgium tax law, reception costs are only 50% deductible for direct tax purposes. However, when reception costs are incurred between 8 June 2020 and 31 December 2020, they are 100% tax-deductible.
The corporate tax treatment of “reception costs” often leads to discussion upon tax audit. Indeed, the standard rule is that they are only 50% tax-deductible. However, for many years there has been an evolving debate during both tax audits and in Belgium courts as to the question when reception costs should be considered as “publicity costs” which are 100% tax-deductible. Heavily summarized: this discussion stems from a similar debate for vat purposes. Notwithstanding that, very recently, the Belgium Supreme Court ruled that reception costs are only 50% deductible for corporate tax purposes, even if they are incurred in the context of a publicity event. Needless to say that this was bad news for many taxpayers …
On the other hand, the corona crisis gave a positive new twist to this matter. Indeed, when reception costs are incurred between 8 June 2020 and 31 December 2020, they are 100% tax-deductible to support the entertainment business industry who has been heavily hit by the corona pandemic. Do note however that, until further notice, “business gift expenses” remain 50% tax-deductible whilst “restaurant expenses” remain 69% tax-deductible.
The saga of the tax deduction of reception costs continues. As a result, taxpayers should keep very well track of the different moments when they incurred these expenses to be able to duly report them in their corporate tax return in due time.