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 are, it's because you have a lot of questions, don't you?
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 in compliance with the rules for reimbursing business expenses?
We have deciphered the specific flat-rate deduction for you to answer 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 contributions.
It is also applied to certain categories of employees, and we come back to this point later in this article.
👉 It was created for professions where professional expenses are often higher than the flat-rate allowance provided for in the decree of 20December 2006.seen in the decree of 20 December 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 the employee and the employer. Moreover, the deduction percentage can be as high as 30%.
🎬 Take a look at this video which outlines everything you need to know about the DFS!
Who is affected 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 haulage sector are not covered by the DFS, whereas drivers are.
Eligible professions include, according to Article 5 of Annex IV of the General Tax Code :
- apprentices, manual workers, machine and lorry drivers working for construction and public works companies (9% allowance) ;
- drivers employed by removal firms (20%);
- road transport drivers and couriers (19%);
- canvassers and negotiators in the property, banking and insurance sectors (30%),
- jewellers (5%);
- divers, underground workers and drillers (10%);
- flight crews, mechanics and pilots in commercial aviation (28%);
- journalists, editors and 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 due to be abolished over the next few years.
What are the advantages and disadvantages of DFS?
Advantages for employers and employees...
The specific flat-rate deduction makes it possible to reduce :
- the basis for calculating Social Security contributions ;
- all calculation bases aligned with those for Urssaf contributions;
- whether in respect of the employee's share or the employer's share.
👉 Employee and employer contributions are therefore lower.
👉 The advantage for the employee is that it increases the NET to be paid.
... and the disadvantages
There are, however, consequences for employee entitlements, particularly IJSS, or daily allowances, and pensions:
- daily allowances are calculated on the salary after application of the allowance, rather than on the total gross salary, which means that they are effectively lower;
- unemployment benefits too;
- retirement benefits are also calculated on the basis of the gross salary after deduction, so the retirement pension may in some cases be lower.
But is the flat-rate deduction really advantageous?
In reality, it all depends on the salary, with entitlements calculated up to the annual Social Security ceiling:
- those whose annual pay, increased by the maximum amount of the DFS, exceeds this ceiling (in 2021: €41,136 + €7,600 = €48,736) benefit in terms of net pay AND have no impact on the amount of their basic pension;
- for those below the ceiling, the application of the deduction will have 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 entitlements 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 no-cumulation rule
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 may nevertheless be combined with these special cases:
- the general reduction in employers' contributions (general reduction, or Fillon reduction): the gross amount is used to calculate the coefficient for the general reduction;
- the Employment Competitiveness Tax Credit (CICE);
- the employer's contribution to meal vouchers, if this is between 50% and 60%;
- reimbursement of monthly transport passes or season tickets;
- long-distance travel allowances paid to construction workers and journeys to and from work sites;
- daily allowances paid to artists and theatre managers for touring;
- season allowances paid to artists, musicians and other entertainment workers employed by casinos and theatres receiving subsidies from local authorities;
- allowances and reimbursements of expenses received by musicians during professional travel in France and abroad;
- night taxi 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 they are sent on mission.
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 the employees, or the staff representatives (CSE), and provide proof that they have been consulted;
- formalise the agreement: a collective labour agreement may provide for the DFS; otherwise, the employee's agreement must be included 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 applying the deduction to pay for incomplete months (paid leave or absences);
- comply with the minimum base for calculating contributions.
So what is it? We'll get to the bottom of it. 👇
Calculation and implementation of the specific flat-rate deduction
The basis for calculating contributions
The basis for calculating contributions comprises :
- the amount of 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 and contributions.
☝️ Compliance with the minimum base: according to the Social Security Code, the base for calculating contributions cannot be less than the amount of the SMIC (minimum wage), 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, salary and bonuses combined ;
- he also pocketed €5,000 in flat-rate 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 received €100 in reimbursements for expenses.
▷ Calculation 2 :
- the employer reinstates the amount paid as reimbursement of expenses in the base ;
- it 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 because 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 security entitlements, particularly for pensions and daily allowances.
It is therefore essential to understand the conditions of application and to simulate your entitlements 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.