Landmark ruling on disguised dividends, supplier expenses allowed

The payments concerned the company's operations

The case concerned a number of invoices from specific subcontractors who had invoiced the company for work performed.

The Tax Agency questioned whether the expenses could genuinely be attributed to the company's activities. The Tax Agency then made an estimated allocation and taxed part of the payments to the shareholder as a disguised dividend.

We argued that the invoiced amounts, including VAT, concerned the company's operations, and that there was therefore no basis for treating the payments as a personal financial benefit to the shareholder.

The National Tax Tribunal set aside the Tax Agency's estimate

The National Tax Tribunal granted the client full relief and set aside the Tax Agency's estimated allocation.

The Tribunal found that the expenses could be attributed to the company's activity. The client was therefore not to be taxed on the payments to the subcontractors as a disguised dividend.

The decision was issued on 19 September 2025.

A payment to a subcontractor is not in itself a disguised dividend

The decision is interesting because it illustrates an important distinction in cases involving subcontractors.

Even if the Tax Agency may question whether a subcontractor has performed the work invoiced for, it does not automatically follow that the payment must be treated as a disguised dividend for the company's owner.

Taxation as a disguised dividend requires a basis for attributing a financial benefit to the shareholder.

It is therefore essential to keep the individual tax questions separate and to make a concrete assessment of what the payments actually concern and who has benefited from them.

Cases on subcontractors and disguised dividends

Tax cases involving subcontractors can have significant consequences.

The Tax Agency's disallowance of an expense can affect not only the company's right to deduct the expense and its VAT. In some cases, the Tax Agency also seeks to tax the company's owner personally for the same amounts as a disguised dividend.

It can therefore be decisive to have both the invoices, the payments, the work performed and the other documentation reviewed before deciding whether there is any basis for taxing the owner at all.

If you have received a proposal or a decision from the Tax Agency concerning subcontractors, denied deductions or disguised dividends, you are welcome to contact us for an initial, non-binding assessment of the matter.