Living at the companys expenses
sometimes yes, sometimes no
Case law is not unambiguously: in case a company has a house, and this is used
solely or primarily as housing by the director, are the expenses related to this
house deductible? The tribunal of Gent recently ruled no, but at the same time
the court of appeal came to another conclusion.
The Gent tribunal ruled not over one, but two houses
A man and a woman have a company, which they describe as a real estate company.
This company was created through a couple of mergers and holds a commercial
building, an apartment in Knokke-Heist and a house in Grembergen. In October
2014, the couple transfers its domicile from the house in Grembergen to the
apartment in Knokke-Heist, together with companys registered office. In March
2015, the house in Grembergen is destroyed by a fire. The compensation payment
generates a capital gain. The company wants to temporarily exempt this capital
gain. This is possible when the compensation is reinvested.
In 2017, there is a profound tax audit on the company for the tax years 2015 and
2016. The tax authorities assess that the immovable property which is made
available to the director is not used as part of the companys activities. As a
consequence, the expenses related to the homes are not deductible. Moreover, the
capital gain on the house in Grembergen cannot be tax exempt, since the first
condition is not fulfilled that the goods are used for the professional
activity of the company. The capital gain is therefore fully taxable.
The Ghent judge immediately challenges the qualification as real estate company.
It cannot be denied that the company holds immovable property, but the tribunal
seems to qualify the company as a patrimony company (as a company for the
management of ones own assets) rather than a real estate company (a company
performing real estate transactions).
The tribunal concludes that the fact that the company is registered as a real
estate company does not mean that the expenses relating to the two immovable
goods are automatically considered as deductible professional expenses.
The couple confirms that they use the homes themselves, but that they have the
intention to sell them in the future and that they would generate capital
Such theoretical consideration does not convince the tribunal: the fact that the
buildings will eventually generate capital gains is not sufficiently
demonstrated. And even if they would generate capital gains, currently the
conditions for deductibility are not fulfilled, since the capital gains today
are no given fact.
What about the remuneration theory?
According to this theory, a company can
qualify the expenses in order to grant its director benefits in kind as a result
of his professional activity within this company as deductible professional
This is the case here: the director obtains a taxable advantage
through the free living.
However, it appears that the director paid a contribution for the house. This
own contribution was accounted for on the debit side of his current account. The
amount was exactly the same as the benefit in kind, so the director in practice
didnt have to pay any tax.
The tribunal found that the tax authorities legitimately came to the conclusion
that the benefits cannot be considered as a remuneration, as the equivalent of
the benefit was fully accounted for and the director should repay this
Therefore the remuneration theory does not apply.
The court of appeal on a villa with pool
A case before the Ghent court of appeal concerned a villa with pool and pool
house, in the hands of a management company. The company itself used the
building for 20%. During the rest of the time the building was put at the
disposal of the director, which paid taxes on the benefit in kind.
The company invokes the above-mentioned remuneration theory in order to deduct
the expenses related to the house for 100%.
The tax authorities reject the deduction and argue that the free provision of
the house is not intended to remunerate the director for his services in the
company. The director also received cash and the contract didnt mention the
house as the consideration for services. But the director refers to the minutes
of the general shareholders meeting where it is explicitly mentioned that the
director receives as the remuneration for his mandate both a periodical salary
in cash and benefits in kind related to the private use of the house.
The tax authorities also refer to the disproportionality between the amount of
the benefit in kind and the amount of the expenses. But this argument is never
or rare accepted: the fact that the taxable benefit in kind is much lower than
the real value of the benefits is due to the lump sum valuation which is imposed
by the tax authorities themselves.
After all the court also rejects the argument that the real value of the
benefits is very high. That is an opportunity judgment. The court assesses that
there is only one director and shareholder. No personnel. Thanks to the
director, the company obtains a considerable income and therefore the company
can grant a considerable salary to its director.
The judgment of the Ghent court of appeal shows that a house in a company
together with all its tax advantages is still possible. On the other hand, the
ruling of the Ghent tribunal indicates that there are still potential
The most important difference between both cases seems to lie in the question to
what extent the free house is an alternative remuneration. There should be a
reason for the compensation. This seems to be the case in the courts judgment,
which is not the case in the tribunals ruling. Fact is that who wants to get
the most out of it will receive resistance from the tax authorities. And that
can take a long time