A to Z guide: everything you need to know about the specific flat-rate deduction
As professionals, it's quite possible that you'll come across the specific flat-rate deduction, or DFS, at least if you haven't already.
And if you're here, it's because you have a lot of questions, right?
What is the specific flat-rate deduction orallowance for professional expenses? For which professions can it be applied? What are the advantages and disadvantages for both the employee and the company? How can it be calculated, while respecting the rules governing the reimbursement of professional expenses?
We have deciphered the specific flat-rate deduction for you to answer all these questions. 👇
What is the specific flat-rate deduction?
The specific flat-rate deduction is an allowance applied to the basis for calculating Social Security contributions and unemployment insurance contributions, i .e. on employee and employer social security charges.
It is also applied to certain categories of employees, to which we return later in this article.
👉 It was created for occupations whose professional expenses are often higher than the flat-rate allowance provided for in the decree of Decemberseen in the decree of December 20, 2020, relating to deductible professional expenses for calculating Social Security contributions.
The purpose of the lump-sum allowance for professional expenses is therefore to reduce the contribution base for both employee and employer. Moreover, the deduction percentage can be as high as 30%.
🎬 Take a look at this video that outlines everything you need to know about the DFS!
Who is concerned by the specific flat-rate deduction?
It is the category of employees that determines the application of the specific flat-rate deduction, not the company's activity.
For example, administrative staff in the road transport sector are not covered by the DFS, whereas drivers are.
Among the eligible professions, and according to article 5 of appendix IV of the French General Tax Code :
- apprentices, blue-collar workers, machine and truck drivers in construction and public works companies (9% allowance) ;
- drivers for removal firms (20%);
- road transport drivers and couriers (19%);
- canvassers and negotiators in the real estate, banking and insurance sectors (30%),
- jewelry workers (5%);
- divers, underground workers and drillers (10%);
- flight crews, merchant aviation mechanics and pilots (28%);
- journalists, editors, photographers (30%);
- medical and pharmaceutical sales representatives (30%);
- commercial and industrial sales representatives (30%);
- advertising representatives (30%);
- artists (20-25%);
- fashion designers and models (from 10 to 25%).
💡 Note that these percentages are likely to decrease, as some of them are destined to be abolished within the next few years.
What are the advantages and disadvantages of DFS?
Advantages for employers and employees...
The specific flat-rate deduction reduces :
- the basis for calculating Social Security contributions;
- all calculation bases aligned with those of Urssaf contributions;
- whether on the employee or employer side.
👉 Employee and employer contributions are therefore lower.
👉 The advantage for the employee is that it increases his NET payable.
... and disadvantages
There are nevertheless consequences for employee entitlements, notably IJSS, or daily allowances, and retirement:
- daily allowances are calculated on the salary after application of the allowance, and not on the overall gross salary, which effectively makes them lower;
- unemployment benefits too;
- retirement benefits are also calculated on the basis of gross salaries after deduction, so in some cases the retirement pension may be lower.
But is the flat-rate deduction really advantageous?
In reality, it all depends on salary, as entitlements are calculated up to the annual Social Security ceiling:
- those whose annual remuneration, increased by the maximum amount of the DFS, exceeds this ceiling (in 2021: €41,136 + €7,600 = €48,736) gain on net salary AND are not impacted on the amount of their basic pension;
- for those below the ceiling, the application of the deduction has an impact on the amount of their basic pension, with a few exceptions (such as freelance journalists, whose pension is not calculated on the basis of gross salary).
Employees are advised to carry out a simulation of their rights with and without the deduction, to get an idea of which system is most advantageous for them in the long term.
Conditions for implementing the flat-rate deduction
The rule of non-cumulation
One of the main conditions to be taken into account by the employer is the rule that the specific flat-rate deduction must not be combined with the exemption from contributions on sums paid for the reimbursement of professional expenses, i.e. their exclusion from the basis for contributions.
The application of the specific flat-rate deduction can nevertheless be combined with these special cases:
- the general reduction in employer contributions (general reduction, or Fillon reduction): the gross amount is used to calculate the coefficient for the general reduction;
- employment competitiveness tax credit (CICE);
- the employer's contribution to luncheon vouchers, if between 50% and 60%;
- payment of monthly transport passes or season tickets;
- long-distance travel allowances paid to construction workers, and journeys to and from work sites;
- daily expense allowances paid to artists and stage managers on tour;
- season allowances paid to artists, musicians and other entertainment workers employed by casinos and theaters receiving subsidies from local authorities;
- allowances and reimbursements of expenses received by musicians during business trips in France and abroad;
- night cab fares for journalists, when the time of travel no longer allows the use of public transport, as well as their travel and subsistence expenses when sent on assignment.
Rules for implementing the flat-rate deduction
The following are the other basic rules to be observed when implementing the DFS:
- respect the category of professions concerned;
- not exceed the deduction limit of €7,600 per employee per calendar year;
- obtain the consent of employees, or staff representatives (CSE), and provide proof of their consultation;
- formalize the agreement: a collective bargaining agreement may provide for DFS; otherwise, the employee's agreement must be set out in his or her contract or an amendment thereto;
- be able to prove on request that the employee incurs expenses that are not reimbursed (in 2020, the Bulletin officiel de la Sécurité sociale [BOSS] tightened the conditions for benefiting from the specific flat-rate deduction);
- not to apply the deduction to pay for incomplete months (paid vacations or absences);
- respect the minimum base for calculating contributions.
But then, what is it? We'll get to it. 👇
Calculation and implementation of the specific flat-rate deduction
The basis for calculating contributions
The basis for calculating contributions comprises :
- the amount of the salary,
- salary accessories, bonuses, allowances, etc.
- reimbursements of professional expenses (lump-sum allowances and actual reimbursements).
This is known as the base for social security contributions.
☝️ Respecting the minimum base: according to the French Social Security Code, the base for calculating contributions cannot be less than the SMIC, after application of the allowance, even if the SMIC is increased by allowances, gratuities or bonuses.
Examples of how to calculate a specific flat-rate deduction
▷ Situation 1:
- an employee earned €50,000 over the year, including salary and bonuses;
- he also pocketed €5,000 in lump-sum allowances for professional expenses;
- his professional category is associated with a 20% allowance.
▷ Calculation 1:
- remuneration + fixed allowances = €50,000 + €5,000 = €55,000 ;
- (55 000 € x 20)/100 = 11 000 € ;
- The deduction limit of €7,600 is exceeded;
- The employer must therefore apply the deduction ceiling: €55,000 - €7,600 = €47,400;
- Social security contributions will be applied and calculated on the sum of €47,400.
▷ Situation 2:
- an employee earns €1,900 gross per month;
- his activity entitles him to a specific flat-rate allowance for professional expenses of 30% ;
- he has received expense reimbursements amounting to €100.
▷ Calculation 2 :
- the employer reinstates the amount paid as expense reimbursements in the base ;
- then deducts the 30%;
- (1 900 + 100) - 30 % = 1 400 € ;
- the gross monthly minimum wage is €1,554.58;
- the basis for calculating social security contributions of €1,400 cannot be used, as it is below the SMIC, and contributions will therefore be calculated on the basis of the monthly SMIC.
The specific flat-rate deduction in brief
The specific flat-rate deduction offers significant advantages in terms of reducing social security contributions, but it also has disadvantages in terms of employees' social entitlements, particularly for pensions and daily allowances.
It is therefore essential to fully understand the conditions of application and to simulate your rights in order to assess the long-term benefits.
⚒️ If you are an employer, given the complexity of the rules and calculations to be applied, we can only recommend that you adopt a payroll management software package that will take care of this for you.