Expenses deductible or not from the tax return of a company
Verified 01 January 2022 - Legal and Administrative Information Directorate (Prime Minister)
Certain expenses may be deducted from the tax return by the company. On the contrary, other expenses must be included and are taxable.
Expense deductibility rules
To be deductible from a company's taxable income or the trader's income, expenses must meet all of the following conditions:
- Be engaged in the direct interest of the holding, in connection with the social object of the company and with the objective of developing its turnover. Personal expenses are therefore excluded.
- Relating to normal company management (i.e. not excessive, not fictitious)
- Be charged to the year to which they relate
- Not being a counterparty to asset (small industrial and office and software equipment may, by fiscal tolerance, be accounted for as expenses if the amount remains less than or equal to €500 HT
- Be paid and supported by supporting documents, including invoices
- Not to be excluded from the tax result by a law (sumptuous expenses that have to be extra-accounted for, for example)
FYI
deductible expenses not subject to business tax and their interest could not be carried over to 1to April 2021 may be used in the years ending between 1to April 2021 and December 31, 2021. This deferral applies to income received for the year 2021.
Examples of deductible expenses
- Purchase of raw materials for a production activity
- Purchase of products for resale, for a commercial activity
- Interest on current account advances business partners, shareholders or officers
- Meal
- Travel
- Business expenses: office supplies, fees on invoices, postage, telephone, fax, documentation, etc.
- Procedural and litigation costs
- Advertising
- Contributions paid to professional orders or trade unions
- Vocational training costs: fees for studies, courses or training courses, preparation and printing of a doctoral thesis, etc.
- Teletransmission of care sheets by medical professionals
- Dress expenses, made necessary by the exercise of the profession (dress of a lawyer or blouse of a doctor for example), which excludes clothing worn in everyday life
- Depreciation of trade funds when this fund was acquired between 1to January 2022 and December 31, 2025
Deduction Terms
In principle, expenses are deducted for their actual amount.
By exception, certain fees may be assessed on a lump sum basis, including vehicle expenses.
In addition, certain professions benefit from specific schemes enabling them to assess certain costs on a flat basis.
The depreciation shall be carried out in accordance with the rules applicable to BIC: titleContent. They shall be entered in the register of fixed assets and depreciation which operators subject to the controlled reporting regime are required to keep.
Certain expenses cannot be deducted from the tax result:
- Certain provisions (e.g. provisions for retirement commitments or economic redundancies)
- Cost of acquiring the customer or expense (only interest on any loan to finance this purchase can be recorded as expenses and deducted)
- Lease charge, rental of passenger vehicles and N1 approved or depreciation of passenger vehicles. Non-deductible expenses are the fraction of the amount of vehicles that exceed the following thresholds based on their CO2 :
- €30,000 if the CO2 emission rate is less than 20 g/km
- €20,300 if the CO² emission rate is between 20 and 60 g/km
- €18,300 if the CO² emission rate is between 60 and 140 g/km
- €9,900 for the most polluting vehicles (CO² emission rate greater than 140 g/km acquired from 2006 and the first entry into service of which took place from 1to June 2004).
For example, for a company owning a passenger vehicle with a CO² of 100 g/km, acquired in 2019 for €23,000 VAT amortised over a period of 5 years, the accounting annuity amounts to 23 000 x 20% = €4600. The deductible tax year is 18 300 x 20% = €3660. The difference €940 is a non-deductible charge (to be reinstated). - Expenses considered luxurious (recreational hunting, non-professional fishing, purchase or rental of pleasure homes, yachts and pleasure boats)
- Amounts paid as entrance fees or door fees if, together with rents, they exceed the normal rent of the premises. In this case, they shall be treated as the price of intangible element of the trade fund, not deductible or depreciable.
- In-kind advantage of the individual operator's use of all or part of a building that is registered as a company asset for no charge
- Insurance premiums for contracts involving persons who do not meet the definition of "key person" insurance contracts and premiums for certain life insurance contracts
- Certain taxes (income tax, business tax, contribution onIS: titleContent, etc.)
- Property tax on non-balance sheet property
- CRD: titleContent and CSG: titleContent for its non-deductible share
- Business vehicle tax
- Annual tax on offices in Ile-de-France
- Remuneration of the individual self-employed operator and business partners, other than that of the individual operator's Civil partnership partner or spouse, in the case of a salary subject to social contributions
- Flat-rate allowances for representation and travel expenses. They should not be added to salaries and should lead to excessive remuneration compared to salaries in the same industry.
Certain expenses, which are deductible as a matter of principle from the tax result, may no longer be deductible if they are considered excessive, i.e. above certain thresholds or not meeting certain conditions.
These may include:
- Business gifts (wines, chocolate, books, concert tickets, pens, etc.) offered by the company to its customers, prospects or suppliers, as part of their business relations. If their acquisition value is considered disproportionate to the reality of the commercial relationship or the use of the profession, it cannot be deducted. It must be reinstated in the company. These expenses must be shown on the overhead statement 2067, if their total amount exceeds €3,000 (except for advertising objects, the total value of which must not exceed €69).
- Sponsorship expenses (incurred during cultural, sporting or artistic events) if the name or symbol of the company does not appear and/or the expenses are excessive in relation to the AC: titleContent
- Staff costs and social charges, if they are excessive in relation to the work actually performed
- Employee participation in profit and loss. These participation or interest agreements must not meet the legal conditions and/or they must not be filed with the Dreets: titleContent (ex-Direct)
- Attendance tokens if they exceed a 5% x number of administrators. The upper limit is the annual average of the 5 highest paid persons if the company's workforce is less than 200 employees. If the number of employees exceeds 200, this will be the annual average of the 10 highest paid persons. If the company employs less than 5 employees, the deduction shall be limited to €457 by administrator.
- Interest on loans and shares on overdrafts, if the operator's account is debit
- Financial burden of businesses subject toIS: titleContent. The total amount of net financial expenses must exceed the highest amount between €3 million and 30% income before taxes, interest, depreciation and depreciation.
Exceptional non-deductible expenses include:
- Penalties and fines imposed by an administrative authority (examples: Urssaf: titleContent, DGFIP: titleContent, DGCCRF: titleContentcustoms
- Donations to political parties or sponsorship expenses for certain works, as they benefit from tax reduction
- Reminders for taxes not deductible
- Write-offs of commercial debt (sale, purchase of goods, provision of services), if they do not meet the interest of the holding
- Financial debt forgiveness (e.g. loan or advance)
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