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A tax advisor asks whether compensation agreed upon with a client following an error in their advice can be deducted as a business expense. The Directorate General of Taxes (DGT) rules that it is deductible, as it does not constitute a voluntary gift and is directly linked to the performance of the business activity.
This ruling clarifies that professional indemnity payments made to settle contractual liabilities are legitimate business expenses, provided they are not gratuitous payments.
The tax team reviews your specific situation.
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