A private limited company has a turnover of over €43,000. The DGA does not declare a salary. According to her, the results were too meagre, she actually hardly did anything and, on top of that, she had psychological complaints. The tax authorities correct the salary to €20,000. The parties meet at the tax court. What does the latter say?
Tax authorities' position
According to the tax authorities, the DGA must have performed activities as sole shareholder and director, such as making payments, keeping records and maintaining contact with the accountant. The sales tax return shows that there was €43,199 in turnover. Given the meagre results, the Tax Office does not assume the standard amount for customary pay, but only €20,000.
DGA's point of view
According to the DGA, this is unjustified. The BV never got off the ground, therefore the DGA did not carry out any activities for this company and did not enjoy any income from the BV. The DGA lived off her savings account and had to sell her car to meet her fixed expenses. She also had mental health problems during that year and spent part of that year living with her family abroad in connection with her recovery. In support of this claim, she submitted a doctor's certificate.
Judge's considerations
The DGA has the burden of proof that a lower amount of customary pay than (at the time) €45,000 should be taken into account.
The DGA's assertion that the turnover declared in the turnover tax return (€43,199) is the result of an accounting error because her accountant erroneously included the amount held in her [foreign] bank account (approximately HUF 42,000) is, as the Tax Administration disputes this in substantiated terms, insufficient to doubt the turnover declared. It was neither stated nor shown that someone other than the DGA performed work for the BV. In view of this, the court considers it plausible that the DGA, despite her psychological complaints, performed work for the BV for which she should have taken a customary wage into account.
The DGA did not further argue sufficiently on the basis of which it should be considered that the customary wage should be set at a lower amount than the €20,000 proposed by the Inland Revenue.
Conclusion judge
The DGA has not argued plausibly that the customary wage should be set lower than the amount of €20,000 taken into account by the Inland Revenue.
Note: The DGA will undoubtedly have found it unfair that she had to pay tax on a salary from the moribund BV, but apart from statements to explain this injustice, she did not come up with any evidence that the salary already moderated by the Tax Administration was too high. And with that, the matter was settled.
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