In Dutch tax law, deductible VAT and COST deducted from your turnover (thereby lowering profit) are separate tests.

Generally businesses who have to charge VAT on their turnover, can always deduct the VAT for costs they make, as long as these are 100% serve the business. However, there are a few cost types where this percentage is clearly not 100%. These are costs that have personal benefit – at least in part. For example, if you go out for a business lunch with a prospective client, you will not also eat a ‘private’ lunch. Or in case of the private use of the company car – the VAT in fuel costs are not deductible on the private share.
That means:

  • A cost can be (fully or partly) deductible for profit tax, while
  • The VAT on that same cost cannot be reclaimed as input VAT.

In those cases, the non‑deductible VAT becomes part of the deductible cost.
Below are the main categories where this happens.

1. Food, drink and representation

This is indeed the classic and most frequent case.

VAT For food and drink in the hospitality sector (restaurants, cafés) or catering on events in event locations,
➡ VAT is not deductible

Cost deduction: The cost itself is deductible, but only partly ✅(via the 80% rule or the €5,700 threshold system).

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2. Relationship gifts and staff provisions above €227 per person per year

VATFor gifts to business relations, staff provisions – If total value they exceed €227 per person per year➡ VAT is not deductible

Cost deductionThe cost can still be partly deductible, depending on:

    • Representation rules
  • Income tax or corporate tax rules

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4. Expenses linked to VAT‑exempt turnover

This one is often overlooked. If you have VAT‑exempt income(e.g. from healthcare, education, some coaching structures) or a mix of taxable and exempt turnover – there’s an impact on VAT.

VAT on costs relating to exempt turnover is not deductibleThe cost itself is still deductible for income or corporate tax, but: VAT becomes part of the cost

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5. Private or mixed‑use costs (VAT only on business part)

For mixed‑use expenses (e.g. phone, internet, car):

  • VAT is only deductible for the business‑use portion.
  • For the private part of the use, both the cost and the VAT is non-deductible.

What this means for bookkeeping

  • VAT and cost categories must be treated separately
  • Representation costs and Private or mixed used costs must be clearly flagged in bookkeeping software. Technically they can either be split for each booking or we need to include a correction of the yearly VAT in the Q4 VAT return.
  • When dealing with both VAT tax-exempt and non-exempt turnover, the costs related to these need to be booked separately in the bookkeeping.

Frequently Asked Questions

Can I reclaim the VAT on a restaurant or business lunch?

No. VAT on food and drink in restaurants and cafés, or on catering at event locations, isn't deductible. The cost itself is only partly deductible for profit tax.

What happens to VAT that I can't reclaim?

It becomes part of the deductible cost: you deduct the cost including the VAT.

General information, not tax advice. I am not a tax adviser (belastingadviseur); for your own situation, consider asking a qualified one.