Netherlands: Court allows mosque-shop to enjoy deduction benefits

Netherlands: Court allows mosque-shop to enjoy deduction benefits

A recent court decision by the Breda (Netherlands) court allows a mosque-shop employing volunteers to deduct expenses, and thereby save thousands of euros in taxes. 

The Dutch Tax Administration reviewed the shop's books a couple of years ago and required five years of back-taxes.  The shop's earnings were never counted and went straight to mosque maintenance. 

The foundation in question was established in 1991 and maintains a mosque.  The mosque has a shop in a separate space next to the mosque which sells Turkish spices and specialties, as well as sweets and foreign call-cards.  The shop is run by volunteers, is open throughout the day, but also offers food after the official closing time, enabling the mosque-visitors to pay on their own.

According to the shop manager the earnings were under the 7,500 euro required for paying corporate taxes, due to a deduction of 15,000 euro for 'labor costs'.  This is based on an article in the corporate tax law which enables organizations which serve social interests to make such fictional deductions.  The court accepted the argument and said that the tax authorities did not show any proof of unfair competition.

Tax adviser Bert Bongers says that the judge made the decision without comparing the mosque-shop prices with those of other shops, and that the 'labor costs' deduction is meant only for foundations such as sports clubs.

Fiscal expert Monique Ligtenberg says the new court decision could also apply to museums and zoos which serve social interests and work with volunteers.  She says the decision is clearly against the rules of the Tax Administration, which can still challenge the decision.

Sources: Nederlands Juridisch Dagblad, Telegraaf (Dutch)

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