Restrictions on the tax-deductibility of commission for luncheon vouchers – a new judgement of the Supreme Administrative Court

In its judgment of 20 February 2014 (File No. Afs 33/2013-34), the Supreme Administrative Court (SAC) confirmed the practice applied by tax authorities that accept as tax-deducible only 55% of the costs of commission for luncheon vouchers reported by employers. Derived from the Income Taxes Act (specifically Section 24 (2) (j) (4)) and Guideline D-300 (currently D-6), this practice has often been disputed by the professional public, claiming that the costs of the commission should be tax-deductible in full. In this case, the plaintiff (a taxpayer) claimed that the commission was a tax-relevant expense and argued that luncheon vouchers are tokens of value assessed at nominal value, and the costs of acquiring the tokens of value are a tax-relevant expense item. A tax authority contested the procedure and divided the costs of commission into a tax-deductible part (55%) and a non-tax-deductible part (45%), i.e. the same ratio used for dividing the tax-deductibility of catering contributions. This procedure and the conclusions drawn by the tax authority have been affirmed by the SAC. In this respect, the SAC stated that Guideline D-300 did not go beyond the Income Taxes Act, as claimed by the plaintiff, and the procedure adopted by the tax authority fully complied with the relevant provisions of the Income Taxes Act governing the tax-relevance of an employer’s costs of employee catering. As a result, we recommend that this conclusion be observed when preparing a corporate income tax return and, at all times, 45% of the reported costs of the commission should be considered non-tax-efficient.