November 10, 2023
Which food and beverage costs are tax-deductible for business?
Have you incurred expenses for food and beverages? As a business owner, you naturally want to know whether you can reclaim the VAT and deduct the costs from your profits. The rules for food and beverage costs vary depending on the situation, making it complex. In this article, we will clearly explain the rules regarding food and beverage costs.
Business expenses or not?
Firstly, the costs of food and beverages are never deductible if consumed without employees or business relations. So, if you eat alone while traveling to a client or during overtime, these costs are never deductible. They are considered purely private expenses.
Which food/drink costs are considered business expenses?
- Costs of coffee and tea for the office
- Meals with business relations such as (potential) clients → promotional gifts in the form of food, drinks, or consumables
- Office warming or an anniversary celebration for your company → representation cost
- Cafeteria costs in the case of employees (consider the tax implications)
Costs of coffee and tea for the office
The costs of coffee and tea for the office are deductible for both income tax and value-added tax (VAT). These costs are therefore deductible from your profits, and the VAT on these costs can be reclaimed.
Promotional gifts/representation costs deductible from profits
Business dinners are considered gifts, and the costs of a reception fall under representation costs. The same rules apply to the costs of promotional gifts and representation costs. Both costs are 80% deductible from profits, unless you exceed the threshold. The threshold in 2023 is €5,100. In practice, 99% of entrepreneurs are below this threshold because almost no one spends more than €5,100 in a year on business dinners/receptions.
Example: You spent €2,000 on business dinners in a year. You can then deduct €2,000 * 0.8 = €1,600 from your profits.
Promotional gifts/representation costs deductible for VAT
Not all business expenses are also deductible for VAT. The VAT on restaurant business dinners is never deductible. However, the VAT on other gifts, such as a box of chocolates, is deductible. Also, the VAT on the costs of a caterer is not deductible.
Additionally, it is crucial to note the name of the business relation on the receipt for business dinners, ensuring you can later prove to the Tax Authorities that it was indeed a business-related expense.
The rules for food and beverage costs vary depending on the situation, making it quite complex. Therefore, it is important to pay close attention to these rules to avoid errors in your administration. Remember that the costs of food and beverages are never deductible unless incurred with business relations or employees!
