How can I reclaim VAT on expense claims?
As a company, you incur expenses that are necessary for the smooth running of your business, particularly business expenses, which give rise to expense claims.
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 the VAT recovery process be simplified? 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 on the returns that companies file for the payment of the tax.
As a general rule, business expenses are eligible for VAT recovery by the company, except in the exceptional cases discussed below.
Conditions for recovering VAT on expense claims
In the context of managing and reimbursing business expenses to its employees, a company may recover certain amounts of VAT, in accordance with specific provisions:
- VAT may be deducted where it applies to a taxable business activity, i.e. the company or organisation must be subject to VAT when selling its goods or services;
- the expenditure must be incurred in the course of business and in the interests of the company - expenditure for private use is expressly excluded;
- all invoices and supporting documents must be kept and must bear compulsory details.
What supporting documents are accepted?
Supporting documents must be proof that the expenditure falls within the scope of a need inherent in the life of the company and its activities.
In most cases, this will be a till 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 inclusive of VAT, nor can you use credit card slips.
Invoices: storage and compulsory information
All invoices issued by suppliers must be kept by the company.
The 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 types of expense claim and conditions
Meal expenses
🍽 Meal expenses are associated with business expenses; and in this specific 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 will suffice, as long as it indicates the rate and amount of VAT, 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 a company pays for hotel services for its employees or directors on business trips, it will not be able to deduct the 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 cover various expenses, such as payment for fuel, parking and tolls. VAT is not always recoverable, even if it is shown on the invoice.
Here are the details below.
VAT can be reclaimed on :
- motorway tolls
- fuel costs for diesel and petrol (80% recoverable for passenger vehicles and 100% for commercial vehicles),
- rental and maintenance of commercial vehicles only.
☝ Good to know: when it comes to fuel, the vehicle can be either a private vehicle or one owned by the company. In the first case, it must be proved that the journeys were made in the interests of the company.
VAT is not recoverable on
- journeys by plane, train, taxi, bus or boat,
- the purchase or hire of a parking space.
Mileage-based expense claims, on the other hand, are not subject to VAT.
Company gifts
🎁 Gifts are eligible for VAT deduction, up to a limit of €69 including VAT, per year and per recipient.
Gifts given to customers may be tax-exempt when they are used to support the smooth running or development of the company.
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 an order form, 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 purchases of goods from foreign suppliers, whether established in countries outside the European Union or within the EU, special provisions apply.
How can VAT recovery on expense claims be simplified?
The question was "How can I reclaim VAT on expense claims? Our answer: by opting for expense claim management software that does the calculations for you. Discover our selection without further ado.
Cleemy
⚙️ Cleemy works simply: your employees declare their expenses in two clicks, take a photo of their receipt, then the tool extracts the relevant information using OCR and fills in the associated fields automatically, including VAT.
���� It determines the recoverable VAT, charges it to the appropriate accounts and if there are any inconsistencies on the invoice, the tool adjusts 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 category of expense, to make VAT processing easier.
It has also developed a partnership with VAT4U, Europe's leading online VAT recovery platform, to simplify and automate this process for business expenses.
Silae Expense
⚙️ Thanks to its sophisticated artificial intelligence, Silae Expense detects the categories of expenditure on an invoice, then extracts the exact amount of VAT and records it by attaching the PDF proof of the expense.
👍 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 for optimising the management of your employees' business travel, by combining both travel booking and the management of expense claims (transfers, hotel, etc.), including VAT.
👍 It streamlines processes between all the players involved, improves cost control and optimises 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 claims and detection of any inconsistencies make their work easier. The tool is compatible with your accounting software and allows 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 the elements that need to be extracted, such as VAT, making your VAT returns easier.
SAP Concur
⚙️ The SAP Concur application tracks business expenses during business trips in real time: purchase of the trip, integration of each expense in real time and en route (ordering a taxi, restaurant costs, etc.) with scanning of receipts, automated payment and approval.
👍 It also offers an audit solution for analysing claims and invoices as they are received , to detect recoverable VAT.
Don't pay the price for poor management...
... and switch to automated management of your expense claims!
To avoid any unpleasant 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 a considerable amount of time in processing your expenses.
All the 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: records 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