Expense reports: what are the rules?
- Accounting expertise
Mileage allowances, VAT recovery on invoices made out in the name of the company, benefits in kind… Managing expense accounts is a real headache for companies, caught between the desire to do things right and the risk of an Ursaff inspection.
No more nightmares, we give you an overview of the situation and remind you of the main rules:
When and how to make an expense report?
First of all, it is essential to keep in mind that business expenses must be incurred, as their name indicates, within the framework of the company’s activity. Expenses that are not justified by the company’s interest cannot be included in an expense report.
Similarly, all costs incurred must be justified by an invoice (with a few exceptions, the best known being the mileage scale for travel) and in proportion to the actual need.
The terms of repayment
Business expenses can be reimbursed in two ways:
Reimbursement of actual expenses
This is the most common choice, and above all the only one available to managers and business leaders. In this case, all costs must be supported by an invoice and reimbursed to the nearest euro cent.
Also included in this category are the so-called mileage allowances, when the employee uses a private vehicle in the performance of his or her duties. Again, all travel must be justified and reimbursed to the penny.
This allowance depends on the fiscal horsepower of the vehicle, but also on its type (passenger car, two-wheeler, utility vehicle) as well as on the annual distance travelled. All of this information can be found in the Ursaff’s mileage allowance scale.
Flat-rate reimbursement of expenses
Business expenses are reimbursed up to a fixed amount established by the employer, regardless of the actual expenses incurred. This may be the case for example for accommodation or transport expenses. For example, sales representatives can receive a fixed monthly reimbursement for their travel expenses.
Expense report and tax deduction
Supported business expenses are classified as expense reports and are therefore :
- Not subject to income tax.
- Not subject to social security contributions.
- Deductible from the company’s income.
Ursaff rules for expense reports
⚠️ When reimbursements exceed the thresholds set by the Ursaff these are then considered as benefits in kind and subject to normal taxation.
Be careful, because this is one of the most frequent anomalies during the Ursaff controls.
VAT on expense reports
As expenses incurred in the course of business, VAT on expense reports is recoverable. However, the formalism of invoices must obviously be respected:
- Invoice made out to the company and not to the employee or officer
- Clear indication of the VAT amount
- VAT payable at the supplier’s
In addition, the usual rules relating to the deductibility and recovery of VAT apply. For example, VAT on fuel is subject to special rules, while mileage allowances or transport by plane or train are not subject to VAT.
Urssaf control and expense accounts: mistakes to avoid
The great fear of any entrepreneur: making a mistake that could lead to an adjustment in the event of an Urssaf inspection. To avoid problems, pay the greatest attention to the points that are most frequently raised during URSAFF controls:
- No receipt: without an invoice, no reimbursement of business expenses is possible
- Exceeding the thresholds: in this case, the reimbursements must be considered as a benefit in kind, subject to different taxation.
- Non-business expenses: expense reports are only for expenses incurred in the course of business.
- Flat-rate reimbursement for managers: note that company managers can only opt for the reimbursement of actual expenses.
- Duplicate expenditure: between carelessness and fraudulent activity, double reimbursement (same invoice reimbursed twice) can lead to heavy penalties.
The last word
If the principle of expense reports is simple and understood by all, their administrative and accounting management can be complicated and lead to many errors. In the event of an Ursaff audit, these can have serious consequences for employees, managers and the company itself.
In order to avoid penalties for misinterpretation or carelessness, it is strongly recommended that you seek professional advice from those who can analyse your situation in detail and advise you on the best practices to follow.
😉 If you haven’t already, consider opting for an expense report scanning system to save time and avoid losing receipts.
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