No Exact Correlation Required Between Expenses Relating to a Holiday Residence and Benefits in Kind

I. Facts and Procedural Background

The dispute arose between the Belgian State and Dokter R.D.S. bv, a company that owned a lusthuis, a holiday residence within the meaning of Article 53(9) of the Belgian Income Tax Code 1992 (BITC 1992), which was placed entirely at the disposal of its director.

The tax authorities had disallowed the deduction of expenses to the extent that they exceeded the amount of the BIK included in the director’s taxable remuneration.

In its judgment of 24 September 2024, the Ghent Court of Appeal had, by contrast, allowed the expenses to be deducted in full. The Belgian State appealed to the Court of Cassation, arguing that the expenses were deductible only up to the amount of the taxable BIK.

The Court dismissed the appeal.

II. Legal Framework

Article 53(9) BITC 1992 generally excludes expenses relating, among other things, to holiday or recreational residences from deductible professional expenses.

The provision establishes two exceptions: where the expenses are necessary for the conduct of the professional activity by reason of the very nature of that activity, or where they are included in the beneficiaries’ taxable remuneration. The dispute concerned the second exception.

However, Article 53(9) BITC 1992 must be read in conjunction with Article 49 BITC 1992, which requires expenses to have been incurred or borne for the purpose of acquiring or preserving professional income. This provision also forms the basis, among other things, of the so-called “remuneration theory”.

In addition, Article 53(10) BITC 1992 allows expenses to be disallowed where they unreasonably exceed the requirements of the professional activity.

In its judgment of 25 June 2020, the Court of Cassation confirmed that these requirements are cumulative: satisfying one of the exceptions under Article 53(9) does not remove the obligation to demonstrate that the conditions laid down in Article 49 are also met.

III. Key Finding of the Judgment: No Exact Correlation Required

The central issue in the judgment concerns the interpretation of the wording “except where and to the extent that” in Article 53(9) BITC 1992.

According to the Court, this wording does not require an exact correlation between the amount of the expenses incurred and the amount of the BIK, nor does it require the expenses to be equal to or lower than the amount of that benefit in order to qualify for deduction.

The Belgian State’s argument that expenses relating to a holiday residence placed entirely at a director’s disposal could be deducted only up to the amount included in the director’s taxable remuneration was legally unfounded.

The Court thus refused to treat the inclusion of the benefit in taxable remuneration – a condition for applying the exception – as a mechanism for capping the deduction.

Once the exception applies, nothing in Article 53(9) BITC 1992 permits the deductible expenses to be limited to the amount of the BIK subject to tax.

IV. The Judgment in the Context of the Remuneration Theory

The judgment builds on existing case law concerning properties made available to company directors.

In its judgments of 14 October 2016, the Court of Cassation held that the existence of a taxable BIK does not automatically make the corresponding expenses deductible: the company must demonstrate that the benefit constitutes remuneration for services genuinely and effectively performed by the director.

A debate subsequently emerged concerning the disparity between the actual cost of the property borne by the company and the amount of the BIK, calculated on a lump-sum basis and often considerably lower.

The Ghent courts gradually moved away from the view that such a disparity was, in itself, sufficient grounds for disallowing the deduction.

In particular, the Ghent Court of Appeal accepted that the absence of strict proportionality between the BIK and the actual expenses does not preclude their deduction where the benefit genuinely constitutes remuneration for services rendered to the company.

The judgment of 18 June 2026 extends this development specifically to the application of Article 53(9) BITC 1992.

The lump-sum nature of the BIK valuation therefore cannot be used to impose a quantitative correspondence between the benefit and the expenses actually borne by the company.

V. Practical Implications

The key takeaway from the judgment is clear: where a holiday residence is made available to a company director and the corresponding benefit is included in the director’s taxable remuneration, the tax authorities cannot rely on Article 53(9) BITC 1992 to cap the deduction of expenses at the amount of the taxable BIK.

However, the judgment does not establish an automatic right to deduct such expenses.

The tax authorities remain entitled, under Article 49 BITC 1992, to verify that the benefit genuinely constitutes remuneration for services actually performed and that the expenses are professional in nature.

They may also invoke Article 53(10) BITC 1992 where the expenses unreasonably exceed the requirements of the professional activity.

In practice, companies must therefore continue to maintain documentation demonstrating that the director genuinely performs services and that the benefit is granted as remuneration.

What the judgment rules out is the possibility of relying solely on Article 53(9) BITC 1992 to justify capping the deduction on the basis of the difference between the lump-sum BIK and the actual cost of the residence.