Taxation of Sole Proprietorships and Partnerships Part 2

In the last article, it was shown how taxation is structured for sole proprietorships and partnerships. Now important distinctions between business and personal expenses follow.

Distinction important for sole proprietorships and partnerships

For self-employed individuals, distinguishing between expenses that are private and those that are business-related is important. Self-employed individuals can generally deduct anything that is business-related. However, all costs must be substantiated with receipts.

Proper distinction between private and business expenses is especially important in the following cases:

• Business trips are accepted as tax-deductible expenses. However, this is logically not the case for purely private trips.
• For vehicles used both for business and private purposes, the proportion of use for each must be declared, affecting the taxation and deductibility of the vehicle.
• For properties, it must also be delineated whether the property is used solely for business or also for private purposes, and if so, to what extent such use occurs.
• Hotel and restaurant expenses are deductible. However, their business nature must be verifiable.
• With work clothing, the rule is that only pure work clothes can be claimed for tax purposes, but not, for example, a suit because it can also be used privately.
• Further education is also to be recorded as a business expense, but not a training.
• Premiums and fees for telephone, radio and television, lawyer fees, etc., need to be allocated between private and business expenses.