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Tax office confirms that hiring a nanny can be a tax-deductible expense

Tax office confirms that hiring a nanny can be a tax-deductible expense

While daycare costs can entitle you to a personal tax deduction of up to 11.20 € per day and per child, this is normally not the case when hiring a nanny. The Belgian Ruling Commission has recently decided that the costs associated with hiring a nanny can under certain conditions be considered a deductible business expense (Ruling nr. 2020.1336, 30 June 2020).

In the case at hand, a nanny was hired by a company via a temporary employment agency and made available part-time to the company manager for a minimum of 13 hours per week. The cost for hiring the nanny was directly paid by the company and the latter entered into an employment relationship with the nanny. Subsequently, the company made the nanny available to its manager free of charge.

The taxpayer argued that the hiring cost should be considered a business expense because if the nanny would not be available to the company manager, the latter would be forced to invest less time in the business, which would inevitably lead to a loss of income for the company.

On the other hand, the tax office argued that making the nanny available to the company manager free of charge, generates a taxable benefit in kind for the latter. For this, the tax office referred to the lump-sum benefit amount of 5.950,00 € per year that normally applies to household staff, as stipulated in the Belgian Tax Code. An amount that may be proportionally reduced if the nanny only works part-time (whereby full-time corresponds to 1.672 working hours per year).

It was also set as a condition by the Ruling Commission that the nanny should, in principle, only be available on working days and during ‘normal’ working hours. The definition of ‘normal’ working hours must be consistent with the working hours that are considered normal in the sector in which the company is active.

If the nanny would be called upon outside the normal working hours (e.g. for an exceptional meeting in the evening), the company should be informed of this in writing and this should be justified. Although the tax office was not explicit about this, it is to be understood that in case these exceptional circumstances are not sufficiently proven, the costs associated with the nanny can no longer be deducted as a business expense.

This recent tax ruling creates some tax optimization opportunities for those career-focused parents who work via their own management company. It might, in that case, be more tax beneficial to hire a nanny through your company, rather than paying for the cost as a private individual.