• VAT ON CATERING COSTS FOR PUBLICITY EVENTS: VAT AUTHORITIES GIVE IN

VAT ON CATERING COSTS FOR PUBLICITY EVENTS: VAT AUTHORITIES GIVE IN

22 March 2015

The VAT incurred on costs for food and beverages offered during certain commercial events is deductible from now on. The Belgian VAT authorities now make an end to the long-lasting controversy with the Belgian Supreme court.

Belgian Supreme Court as a predecessor…

VAT law is clear on certain rules: VAT incurred on publicity costs is deductible, but VAT on reception costs is not. Food and beverages offered during events is a grey area, on which the Belgian Supreme Court has passed several court rulings between 2005 and 2012.

In 2005 the Supreme Court ruled that reception costs are to be considered publicity costs if made in the framework of an event with an aim to provide publicity.

In 2010 the Supreme confirmed its position: the VAT incurred on catering costs is deductible if the costs relates to a commercial event. The Court clarifies that the activity concerned should aim at informing potential buyers of the existence and conditions of a product or service in order to increase the probability of selling, while before only the end buyer needed to be informed. This results in a further expansion of the application scope for the VAT deductibility of publicity costs. A new position of the VAT authorities remained forthcoming.

In 2012 the Supreme Court repeated the point of view, stating that "an activity which directly and primarily intends to inform potential buyers of the existence and qualities of a product or a service in order to boost sales”, is to be considered an advertising activity on which costs are VAT deductible.” The costs of food and beverages exposed in such advertising activity, are therefore VAT deductible.

… in conflicht with the position of the VAT authorities

The VAT authorities have obstinately persisted for years that an exception to the VAT deductibility applies to food and beverages, because a specific non deductibility is provided for in the Belgian VAT Code.

In a new administrative decision of 2012, the VAT authorities held that the exclusion of the right to deduct input VAT in relation to expenses for food and beverages is applicable in any event, even when the costs are set to promote a certain product or service. This reasoning is underpinned by the fact that, according to the Administration, the legislator’s intention was that such goods and services are analysed in view of their nature (non-deductible expenses for food and beverages) at the time of acquisition. It also puts that the exceptions to the exclusion of the right to input VAT deduction that are exhaustively listed in Article 45, § 3, 3, a) and b) of the VAT Code, only refer in a secondary manner to the destination (catering costs as part of an advertising service) given to the costs incurred.

VAT authorities adopt a new position

In yet another administrative decision issued on 13 March 2015 the discussion is made to an end. From now on, the VAT incurred on costs of food and beverages offered on a commercial event is deductible to the extent that the purpose of the event addresses existing or potential client to have certain goods or services promoted.

What about VAT incurred in the past?

Considering the three year prescription period, VAT payers can claim a VAT deduction or refund of the VAT incurred, which was not deducted or which was claimed for by the VAT authorities since 2012.

Contact

Should you have any further question or require a personal advice with respect to the impact of these rules on your company, please contact your regular contact person at BDO or you may send an email to [email protected] for the attention of one of the members of our Competence Centre VAT:

  • Erwin Boumans: 02/778.01.00
  • Pascal Dauw: 09/210.54.10
  • Kaatje Bondewel: 02/778.01.00
  • Brigitte Braeckmans: 03/230.58.40
  • Joëlle Teuwen: 081/ 20.87.87