Can I put a luxury watch “in expenses”?

Yes, but also no. But let’s start with the fact that the burden of proof is on the taxpayer. Therefore, even if we set up a more complex corporate, ESOP and other structures for clients, we must always be anticipatory of this dimension and tailor the specific setup accordingly. On the watch, this is simple in principle. Unless the taxpayer is using the “80-20 flat rate” (beware, though, this cannot be used for VAT deductions), it is the taxpayer who must demonstrate.

SMART watch for business

With SMART watches, it seems easy to argue for their use for the purposes of texting, time keeping, navigation and other functions that are practical for business. However, unlike a mobile phone, a watch feels more “private” and therefore, in the worst case scenario, the tax office may want you to prove that you only used it for business purposes. And at worst, it might want to show that you did not use it for private purposes (although it is relatively settled that no one can fairly be asked to prove the non-existence of a particular legal fact).

Luxury watches for business

With luxury watches, oddly enough, it can be easier. Here, though, it looks at first glance like a “representation”, which is not recognised as a tax expense by default. However, there are other types of “representation” that are recognised as a tax expense. Why can a superior office space (i.e., location, classification, or reception desk appearance) be recognized as a tax expense and a luxury watch not? After all, we don’t necessarily need both “representations” for business? However, the problem arises in how we can construct the argument that we are only using them for business purposes. Thus, while unique office spaces in themselves indicate their use only for business purposes, luxury watches do not automatically enjoy such an attribute.

Watches for business

Something extra must therefore be done to make them tax deductible. To give them the hallmark of corporate use. For example, get a safe for your office.

Photos from weddings of family and friends must exude a different watch. Don’t buy “ROLEXes.” With ROLEXs as standard, you can harden up in winter, go to the beach in summer, and the more expressive ones with their sleeves rolled up can imagine a Friday outing to a more student-oriented area in them. However, brands such as A. LANGE & SÖHNE or NOMOS Glashutte look much more authentic when worn exclusively for work purposes. And perhaps even as much as those office spaces.

Tax check watch on the company

However, a dispute with the tax office can take less pleasant forms. Namely, the penalties of the tax administration are based on the amount of the ECB base interest rate, and these have already reached a threshold beyond which the penalties are higher than we have been used to for many years. In addition, there is the risk of taxation of the employee’s/statutor’s non-cash income, or the legal risks (including liability for private assets) associated with the deposit return institution. Either way, in the context of lower political (and therefore legal) predictability, this is another reason confirming how important it is to pay at least basic attention to prevention in the context of asset and business protection. For example, through the legal structuring of business and asset ownership.

I also dealt with a similar topic in my lecture “Paying for holidays with a company card” – what about the law and taxes?which is available on our website.

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