Cost of study and fitness children deductible?

A businesswoman had her children on her payroll. In addition to employment remuneration, she deducted the children's paid study and fitness expenses in her profit declaration under other personnel expenses. This amounted to over €17,500. The tax authorities corrected the deduction of these costs. How does the court rule?

Study costs charged against company profits?
The entrepreneur argued that she could deduct the study costs because the studies added value to the business. She has also argued that - in addition to a low cash wage - she wanted to offer an attractive package (in a tight labour market) to the daughter and son, bearing in mind that the study costs were (very) high and the children were not eligible for study financing. She also argued that reimbursing the study costs was in line with her vision of being a good employer.

In doing so, according to the court, the businesswoman failed to meet her burden of proof. She did not further substantiate the claim that the studies add value to the company. The studies do not focus specifically on the field in which the businesswoman works, nor on the support activities that both employees perform in the company. It is also hard to see how the knowledge acquired in these studies can be made productive within the daughter and son's support work in the company. The court therefore held that the tax authorities were right not to allow the deduction of the study costs.

Fitness expenses charged against company profits?
The businesswoman's assertion that she could deduct the fitness expenses because exercising promotes the health of employees was, in the judge's view, insufficient proof that exercising is useful to the company and that the expenses are intended to meet the needs of the businesswoman herself and her children. It was up to the entrepreneur to substantiate her position with evidence and make the business connection plausible.

Note: In assessing whether items claimed as costs of the business can be accepted, the key issue is whether the expenditure in question was incurred at arm's length, i.e. with a view to the business interests of the business. The entrepreneur must state facts and circumstances and, if necessary, prove that the expenses were motivated by business motives.