How can I reclaim VAT on expense claims?
As a company, you incur expenses necessary for the smooth running of your business, and in particular business expenses, which generate expense accounts.
For some of these expenses, the law allows you to reclaim VAT on expense claims, subject to certain rules and conditions.
What is the legal framework and what expenses are eligible? How can you simplify the VAT recovery process? Find out in this article!
Expense claims and VAT recovery: what does the law say?
VAT recovery procedures
According to article 208 of appendix II of the French General Tax Code, VAT is deducted from the tax returns filed by businesses.
As a general rule, business expenses are eligible for VAT recovery by the company, except in the exceptional cases discussed below.
Conditions for reclaiming VAT on expense claims
When managing and reimbursing business expenses to its employees, a company can reclaim certain amounts of VAT, in accordance with specific provisions:
- VAT can be deducted when it applies to a taxable business activity, i.e. the company or organization must be subject to VAT when selling its goods or services;
- expenses must be incurred in the course of business and in the interests of the company - expenses for private use are expressly excluded;
- all invoices and supporting documents must be kept and must bear the required information.
What receipts are accepted?
Supporting documents must prove that the expense falls within the scope of a need inherent to the life of the company and its activities.
Most of the time, this means a sales receipt, a bill or a receipt, and often an invoice detailing the amount of VAT.
☝ Please note: you cannot base your VAT deduction calculations on the price including VAT, nor can you use credit card receipts.
Invoices: retention and mandatory information
All invoices issued by suppliers must be kept by the company.
These documents serve as proof in the event of an audit by the tax authorities, and must include the following information (non-exhaustive list):
- the name of the service or good sold,
- the applicable VAT rate ,
- the amount of VAT invoiced,
- the name of the company to which it is addressed (and not that of one of its employees).
In the case of business expenses, the conditions are not always the same: not all expenses are subject to VAT. Let's take a closer look.
Eligible expense types and conditions
Meal expenses
🍽 Meal expenses are associated with mission expenses; and in this precise context, the applicable VAT is recoverable in the following cases:
- meals for an employee travelling alone,
- a meal for an employee with colleagues as part of a meeting,
- business meals, whether with a customer, prospect or partner.
☝ Please note: above €150 excluding VAT, an invoice in the company's name is required. Below this amount, a simple receipt is sufficient, as long as it indicates the VAT rate and amount, the amount excluding VAT and the amount including VAT.
Hotel or accommodation expenses
🏨 Accommodation expenses are subject to specific rules.
In the case of hotel expenses, VAT is not deductible. If the company pays for hotel services for its employees or executives on business trips, it will not be able to deduct the portion of VAT paid to the State.
However, there are exceptions. VAT is recoverable in the following cases:
- an overnight stay paid on behalf of a third party,
- breakfast or another meal in a hotel, for example.
Travel expenses
🚀 These include various expenses, such as fuel, parking and tolls. VAT is not always recoverable, even if it appears on the invoice.
Here are the details.
VAT can be reclaimed on :
- freeway tolls,
- fuel costs for diesel and petrol (partly recoverable at 80% for passenger vehicles and 100% for commercial vehicles),
- rental and maintenance of commercial vehicles only.
☝ Good to know: when it comes to fuel, you can use either a personal vehicle or one owned by the company. In the first case, you need to prove that the journeys were made in the company's interest.
VAT is not recoverable on
- journeys by plane, train, cab, bus or boat,
- the purchase or rental of a parking space.
Mileage reimbursements, on the other hand, are not subject to VAT.
Corporate gifts
🎁 Gifts qualify for VAT deduction, up to a limit of €69 incl. VAT, per year and per recipient.
Gifts given to customers may be tax-exempt if they are used to support the company's operations or development.
Special cases: expense claims without VAT
The following rule applies: VAT is deductible if, and only if, it is clearly stated on an invoice; otherwise, it cannot be deducted.
This means that VAT cannot be reclaimed on the basis of a purchase order, a quotation or even a pro forma invoice (only the original is valid).
If the invoice received does not include VAT, it is advisable to contact the supplier to obtain a corrected invoice.
In the case of goods purchased from foreign suppliers, whether established in non-EU countries or within the EU, special provisions apply.
How to simplify VAT recovery on expense claims?
The question was "How can I reclaim VAT on expense claims? Our answer: by opting for an expense claim management software that does the calculations for you. Take a look at our selection.
Cleemy
⚙️ Cleemy's operation is simple: your employees declare their expenses in two clicks, take a photo of their receipt, then the tool extracts the useful information thanks to OCR and fills in the associated fields automatically, VAT included.
👍 It determines the recoverable VAT, charges it to the appropriate accounts, and in the event of inconsistency on the invoice, the tool regularizes the amount to comply with tax rounding rules.
Expensya
⚙️ Expensya is an intelligent expense claim management solution that lets you define the VAT recovery rate for each expense category, to facilitate VAT processing.
👍 It has also developed a partnership with VAT4U, Europe's leading online VAT recovery platform, to simplify and automate this process on business expenses.
Silae Expense
⚙️ Thanks to its sophisticated artificial intelligence, Silae Expense detects expense categories on an invoice, then extracts the exact VAT amount and records it, attaching the PDF expense receipt.
👍 Each expense eligible for deductible VAT is traced and the amount automatically subtracted from your VAT payment to the State.
KDS Neo
⚙️ KDS Neo is a platform that optimizes the management of your employees' business travel, combining both travel booking and expense management (transfers, hotel, etc.), including VAT.
👍 It streamlines processes between all players, improves cost control and optimizes the entire travel management chain.
Philéas Gestion
⚙️ Philéas Gestion is a comprehensive business expense management solution. Managers save time thanks to an intelligent validation system combined with OCR technology.
👍 Automatic analysis of expense reports and detection of any inconsistencies make their work easier. The tool is compatible with your accounting software and enables VAT to be reclaimed.
Rydoo
⚙️ Rydoo is an intuitive solution that manages your standard expense reports (Rydoo Expense) and business travel expenses (Rydoo Travel).
👍 Your employees save time by taking photos of their receipts: OCR technology takes care of detecting elements to be extracted, such as VAT, thus facilitating your VAT declarations.
SAP Concur
⚙️ The SAP Concur application tracks business travel expenses in real time: purchase of the trip, integration of each expense in real time and en route (ordering a cab, restaurant costs, etc.) with receipt scanning, automated payment and approval.
👍 It also offers an auditing solution to analyze claims and invoices as they occur , to detect recoverable VAT.
Don't pay the price for poor management...
... and switch to automated expense management!
To avoid any nasty surprises in the event of a tax audit, companies need to be familiar with the rules governing VAT recovery.
But that's not all! Acquiring this kind of software will streamline your processes and save you considerable time in processing your expenses.
All VAT amounts associated with business expenses are integrated and taken into account in your accounting expenses.
This ensures that you don't miss out on any deductible VAT: traces of all your expenses are kept and the amount of VAT due is automatically calculated so that you only pay what you owe to the State. Are you convinced?
Article translated from French