No deduction for VAT on consultancy costs for business succession within family

• Additional VAT Assessments: The tax authorities imposed additional turnover tax (VAT) assessments and interest on A BV for the years 2015 to 2019, based on their determination that a significant portion of the consultancy costs deducted by the company were actually private expenses of the shareholders, amounting to €160,255.49 and €32,796 (excluding VAT).
• Court’s Ruling on VAT Deduction: The Zeeland-West-Brabant District Court upheld the additional assessments, referencing a prior judgment that established the consultancy costs were not business expenses for A BV but rather personal costs incurred by the shareholders, thereby disqualifying the company from deducting the associated VAT.
• Lack of Direct Economic Link: The court concluded that there was no direct and immediate link between the consultancy fees and the company’s ordinary economic activities, in accordance with European Court of Justice precedents. A mere causal relationship was insufficient to justify VAT deduction, reaffirming the necessity for a direct connection between the incurred costs and the business activities of the company.

Source BTW jurisprudentie

ECJ Cases referred to

• C-104/12 (Becker) – Supplies of lawyers’ services do not give that undertaking the right to deduct as input VAT – VATupdate
• C-132/16 (Iberdrola Inmobiliaria Real Estate Investments) – Conditions for the Right to deduct VAT (!!!) – Renovation free of charge for the benefit of a third party – VATupdate

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No deduction of input tax for private advisory fees shareholders

• Input VAT Deduction Denied: The court ruled that X BV cannot deduct input VAT on consultancy costs related to tax advice for family business succession, as these costs are classified as private expenses of the shareholders, lacking a direct link to the company’s taxable activities.
• Assessment of Consultancy Costs: X BV had deducted significant amounts as input tax for consultancy services, but the court determined these expenses did not qualify as business expenses for the company, leading to additional VAT assessments for the periods in question.
• Legal Precedent Cited: The ruling emphasized that a mere causal link between the expenses and the company’s activities is insufficient for VAT deduction eligibility, aligning with established case law from the Court of Justice of the European Union. Consequently, X BV’s appeals against the tax assessments were declared unfounded.

Source Taxlive

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• The court case is from Rechtbank Zeeland-West-Brabant, dated 22-08-2025
• The issue is whether there is a right to deduct input tax
• Input tax can be deducted if there is a direct link between the service or goods received and the taxable activities or if the costs are part of general expenses
• The burden of proof for the right to deduct input tax lies with the taxpayer
• The taxpayer claims to be the recipient of advisory services and that these costs are part of their taxable economic activity
• The inspector argues there is no direct link between the advisory services and the taxpayer’s taxable activities
• The court previously ruled that the advisory costs are personal expenses of shareholders, not business expenses of the taxpayer
• The court finds no direct link between the advisory costs and the taxpayer’s economic activity
• The taxpayer is not entitled to deduct input tax

Source: uitspraken.rechtspraak.nl

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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