Expenses must be justifiable for business purposes

REFIDAR MOORE STEPHENS: When it comes to business expenses, the burden of proof rests with the taxable party.

Particularly in the case of entertainment expenses such as restaurant visits, the business context must be clearly demonstrated. Otherwise, the tax authority will assume that the expenses were incurred in a private capacity and will assess the relevant sum as profit.

In a recent ruling, the Swiss Federal Court put two overconfident shareholders firmly in their place. The pair had dined out at certain restaurants 39 times in 2010 and 49 times in 2011. This corresponds to almost weekly visits, some of which occurred on public holidays and on the birthdays of the two men and their wives.

In their defence, the shareholders argued that they had been entertaining potential customers and cited a tax ruling – but in vain. They were unable to prove a business context for the meals, and the court also noted the high level of wine and champagne consumption on each occasion, which hardly seemed consistent with a business meeting. (Source: BGE 2C_52/2018 dated 23 March 2018)