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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 Dutch BUA decree prescribes how to determine whether the threshold amount of 227 euro has been exceeded.
Until January 1, 2024, it was common practice that any employee contribution (excluding VAT) for staff provisions, business gifts, or other gifts could be deducted from the total expenses for the purpose of calculating whether the threshold is exceeded. If, as a result of employee contributions, the expenses remained below the BUA threshold, the business was allowed to deduct the VAT on those expenses.
For example, based on this policy, a benefit to an employee with a total value of 250 euro, where the employee paid a personal contribution (excluding VAT) of 25 euro, did not lead to a BUA adjustment.
However, according to the State Secretary, this deduction of the personal contribution is more generous than the BUA itself allows. For this reason, this approval has been removed from the Dutch Tax Administration’s website. This means that for the BUA adjustment relating to the years 2024 and 2025, the tax authorities no longer allow deduction of the personal contribution when calculating the threshold amount of 227 euro. If this change has a significant impact on your BUA correction, we recommend contacting your advisor
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