Expenses which may or may not be deducted from a company's income tax
Verified 01 January 2022 - Directorate for Legal and Administrative Information (Prime Minister)
Certain charges may be deducted from the company's tax result. On the contrary, other expenses must be included and are taxable.
Expense Deductibility Rules
In order to be deductible from the taxable profit of a company or from the income of the trader, the expenses must satisfy all of the following conditions:
- Be engaged in the direct interest of the holding, in relation to the social object of the company and with the objective of developing its turnover. Personal expenses are therefore excluded.
- Relate to normal company management (i.e. not excessive or fictitious)
- Be recognized as an expense in the period to which they relate
- Not being the counterpart of a immobilization (small-scale industrial equipment and office and software equipment may be recognized as an expense by tax tolerance if their amount remains less than or equal to €500 HT)
- Be paid and rely on supporting documents, including invoices
- Not be excluded from the tax result by a law (for example, summary expenses that must be reinstated extra-accountancy)
deductible expenses not subject to business tax and their interest which could not be carried over to 1er april 2021 may be used in fiscal years ending 1er April 2021 and December 31, 2021. This deferral applies to revenues received in respect of the year 2021.
Examples of deductible expenses
- Purchase of raw materials for a production activity
- Purchase of products for resale, for commercial activity
- Interest on advances in current accounts shareholders or managers of the business
- Meal costs
- Travel Expenses
- Business expenses: office supplies, fees for receipt of bills, postal, telephone, fax, documentation costs,...
- Legal and litigation costs
- Advertising costs
- Contributions paid to professional associations or trade unions
- Vocational training costs: study costs, advanced courses or traineeships, costs of preparing and printing a doctoral thesis, etc.
- Teletransmission of care sheets by the medical professions
- Expenditure on clothing made necessary by the exercise of the profession (dress of a lawyer or gown of a doctor, for example), which excludes clothing worn in everyday life
- Depreciation of goodwill when that goodwill has been acquired between 1er January 2022 and December 31, 2025
Conditions for deduction
In principle, expenses are deducted for their actual amount.
By way of exception, certain costs may be assessed on a flat-rate basis, in particular vehicle expenditure charges.
In addition, certain professions benefit from specific schemes enabling them to assess certain costs on a flat-rate basis.
The depreciation shall be carried out in accordance with the rules applicable to BIC: titleContent. They must be included in the register of fixed assets and depreciation that 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 for economic redundancies)
- Customer or expense acquisition cost (only interest on any loan to finance this purchase can be recognized as an expense and deducted)
- Lease fee, rental of passenger vehicles and N1 type approved or depreciation of passenger vehicles. Non-deductible expenses correspond to the fraction of the amount of vehicles that exceed the following thresholds according to their CO emission2 :
- €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 first put into service from 1er June 2004).
For example, for a company that owns a passenger car with a CO² of 100 g/km, acquired in 2019 for €23,000 Amortized over a period of 5 years, the accounting year is 23,000 x 20% = €4,600. The tax deductible annuity is 18,300 x 20% = €3660. The difference between €940 is a non-deductible (reinstatement) charge.
- Expenditure considered as luxurious (hunting for leisure, non-professional fishing, purchase or rental of pleasure homes, yachts and pleasure craft)
- Amounts paid as entrance or non-entrance fees if, added to the rents, they have a total exceeding the normal rent of the premises. In this case, they shall be treated as the price of one intangible component of the goodwillneither deductible nor depreciable.
- Advantage in kind arising from the private use of all or part of immovable property included on the assets of the company by the individual operator free of charge
- Insurance premiums on contracts for persons who do not meet the definition of key man insurance contracts and premiums on certain life insurance contracts
- Certain taxes (income tax, business tax, contribution on theIS: titleContent, etc.)
- Property tax on immovable property not on balance sheet
- CRDS: titleContent and CSG: titleContent for its part non-deductible
- Business vehicle tax (VAT)
- Annual tax on offices in Île-de-France
- Remuneration of the self-employed sole holder and members of businesses of persons, except that of the Civil partnership or partner of the sole holder in the case of wages subject to social contributions and contributions
- Flat-rate allowances for entertainment and travel expenses. They should not be added to wages and should result in excessive remuneration compared to wages in the same industry.
Certain expenses, which are deductible in principle from the tax result, may no longer be deductible if they are considered to be excessive, that is to say exceeding 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 reintegrated into the company's outcome. These expenses must be shown on the statement of overheads no. 2067, if their total amount is more than €3,000 (except for advertising items, the total value of which, including tax, may not exceed €69).
- Sponsorship expenses (incurred in connection with cultural, sporting or artistic events) if the name or acronym of the company does not appear and/or the expenses are excessive in relation to the CA: titleContent
- Staff costs and social security contributions if they are excessive in relation to the work actually performed
- Employee participation in the results and profit-sharing premiums. These participation or incentive agreements must not meet the legal conditions and/or they must not be deposited with the Dreets: titleContent (ex-Direct)
- Attendance tokens if they exceed a maximum of 5% x number of administrators. The upper limit is the annual average of the top 5 earners if the company has less than 200 employees. If the workforce exceeds 200 employees, this will be the annual average of the top 10 earners. If the company employs fewer than 5 employees, the deduction is limited to €457 per administrator.
- Interest on loans and overdraft assets, if the operator's account is debtor
- Fraction of the financial charges of businesses subject toIS: titleContent. The total net financial expense must exceed the greater of €3 million and 30% profit or loss before taxes, interest, depreciations and depreciation.
Exceptional non-deductible expenses include:
- Penalties and fines imposed by an administrative authority (examples: Urssaf: titleContent, DGFIP: titleContent, DGCCRF: titleContent, customs)
- Donations to political parties or patronage expenses for certain works, as they benefit from a tax reduction
- Reminders of taxes in respect of non-deductible taxes
- Write-offs of commercial claims (sale, purchase of goods, provision of services) if they do not meet the operational interest
- Write-offs of financial claims (e.g. loan or advance)
- General Tax Code: Article 39For BICs
- General Tax Code: Article 93For NLCs
- General Tax Code: Article 212aDeductibility of financial charges
- General Tax Code, Annex 4: Articles 4 J to 4 L
- Law No. 2021-953 of 19 July 2021 amending finance for 2021