The Supreme Administrative Court rejected a taxpayer’s claim to deduction a brokerage fee (commission) paid to an unrelated party as a deductible expense despite supporting documents and witness testimonies. The court stated that the burden of proof is on the service recipient that must prove that the brokerage did actually take place, and a taxpayer claiming that this would violate the broker’s trade secrecy does not change the burden of proof.
A brokerage fee for negotiating contracts between a local distributor and a manufacturer was incurred. Due to a change in the business model, the distribution activity previously carried out by the parent company had purportedly been transferred to the taxpayer (the local distributor). The taxpayer claimed that without engaging a broker, it would have been impossible to establish and develop the business relationship with the supplier (manufacturer), and supported this with witness testimonies. The witnesses stated that negotiations on extending the contracts had been significantly more difficult and time consuming without a broker, but did not state anything about the substance or specific circumstances of the services.
The court found the witness statements were so vague that they were found insufficient to satisfy the burden of proof. The broker’s representative, who was purportedly present at the negotiations, also gave testimony during the tax inspection, but his testimony was inconsistent and at times contradictory. The fact that the distributor could purchase and distribute the manufacturer’s product long before the brokerage agreement was concluded and the business model changed also did not help the distributor’s position.
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