Expenses incurred as a self-employed in secondary occupation are therefore not always tax deductible. On the one hand because the tax authorities impose an amount of restrictions, on the other because the tax authorities can also refuse the deduction of certain costs.
For example, if an entrepreneur cannot prove that the expenses incurred are effectively for his business. So the taxman may refuse certain expenses if they turn out not to be professional expenses.
However, the tax authorities may not judge the expediency of the costs during tax audits. So what exactly does such an opportunity assessment entail in practice?
Self-employed in secondary occupation: expenses and the tax authorities
To start with, let us briefly give the definition of an accounting cost as it is stated in the law book. Not because that definition is important, but rather to show how broad & vague it is.
Accounting costs are tax-deductible professional expenses only if they are done or borne in the taxable period to obtain or maintain taxable income (art. 49 ITC 92).
Of course, that still leaves a lot of room for interpretation and there will always be. After all, assessing whether something can be done in your accounts is never an exact science. Not even if you use the services of an accountant, even then it remains an estimate (which actually comes from you).
Who proves?
The law places the burden of proof of the deductibility of professional expenses on the taxpayer, the entrepreneur in other words. In practice, the tax authorities do more readily accept from some expenses that they are deductible, i.e. professional expenses. Thus, auditors normally ask few or no questions when office expenses, administrative costs, purchases of trade goods, etc. are entered.
While they often do view costs from e.g. travel, gifts, restaurant costs etc. critically.
No opportunity judgment from tax authorities
The tax authorities should not make the deduction of expenses subject to an opportunity judgment. That is, the taxman may not disallow costs in your accounts because he does not see the usefulness or expediency of an expense. More on that in the examples below!
Of course, the finality condition may be considered when auditing. This, in turn, indicates that you can justify the expense. Don’t worry, this too will become clear in a moment via the examples below!
Examples of costs as a self-employed person (in secondary occupation)
Laptop purchases 💻
There is a laptop in your accounts from 2,000 euros. Moreover, your company is making a loss due to this purchase.
Final condition: the cost is allowed in your accounts, don’t worry! Quasi every entrepreneur needs a laptop to keep their accounts in order. So the justification of a laptop to maintain or increase your income is there.
Opportunity judgment: an auditor may not refuse to purchase that more expensive laptop because he does not see the point of it. So he may not judge that you could just as well have done your administration on paper, therefore should not have purchased the laptop and that you could have made a profit as a result.
Deductibility of car expenses 🚗
An inspector cannot refuse car expenses because, in his opinion, you could also have travelled by public transport or by bike (opportunity assessment).
As soon as you can prove that you made those car expenses to maintain or increase your income, they can be included in your accounts. Professional reasons for this could include visiting customers, suppliers, colleagues, …
An advertising campaign 📢
The cost of an advertising campaign should not be thrown out of your accounts because you cannot prove that it has led to an increase in your income.
You did embark on that advertising campaign because you were confident of maintaining or increasing your income as a result, which is enough to meet the finality requirement. If it turns out afterwards that income did not increase, that is still no reason for an auditor to throw those costs out of your accounts.
In fact, the tax authorities’ own administrative commentary states that auditors should not lose sight of the fact that costs do not always produce the desired results and that this in itself should not be an argument for rejecting them.
Finally, we would like to advise you to be careful not to exaggerate your professional expenses as a self-employed person in secondary occupation. Always ensure that your costs remain reasonable and that you can justify why you incurred them in a professional context.
Dexxter quick courses
Would you like some more information on entrepreneurship, bringing in expenses, personal income tax of a self-employed person with a sole proprietor, etc.?
Then we have two quick courses ready for you packed with tips & tricks! Discover them here for a self-employed person subject to VAT and here for a self-employed person exempted from VAT.
