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Certain expenses may be deducted from the tax result by the company. On the contrary, other expenses must be included and are taxable.
Expense deductibility rules
To be deductible from a business's taxable income or the professional's income, expenses must meet the following 6 conditions:
- Be engaged in the direct interest of the holding, in connection with the company's social object and with the objective of developing its turnover, which excludes personal expenses
- Attach to normal business management (i.e. not excessive or fictitious)
- Be recognized as an expense in the year to which they relate
- Not being a consideration for asset (small industrial and office and software equipment may, by fiscal tolerance, be recognized as an expense if the amount remains less than or equal to €500 HT
- Be effectively paid and supported by supporting documentation, including invoices
- Do not be excluded from the tax result by an express provision of the law (sumptuous expenses that must be reintegrated extra-comfortably, for example).
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 members, shareholders or officers of the company
- Meal expenses
- Travel Expenses
- Professional expenditure: office supplies, fees on invoices, postage, telephone, fax, documentation (purchase price of professional works, subscription to professional publications)
- Proceedings and litigation costs
- Advertising costs
- Contributions paid to professional orders or trade unions
- Vocational training costs: costs of studies, courses or advanced training courses, preparation and printing of a doctoral thesis, etc.
- Teletransmission of care sheets by medical professions
- Clothing 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.
In principle, expenses are deducted for their actual amount.
By way of exception, certain costs may be assessed at a flat rate, including costs relating to expenditure on vehicles..
In addition, certain professions benefit from specific schemes enabling them to assess certain costs at a flat rate.
The depreciation shall be carried out in accordance with the rules applicable to BIC and 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 pension commitments or for economic redundancies)
- The cost of acquiring the customer or the expense (only interest on a possible loan intended to finance this purchase can be recognized as expenses and deducted)
- Leasing charges, leasing of N1-approved passenger vehicles or depreciation of passenger vehicles according to their date of entry into service and their CO2 for the fraction of their acquisition price TTC greater than:
- €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 exceeding 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 amortized 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 expense (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 or door fees if, together with the rents, they exceed the normal rent of the premises (in this case, they are assimilated to the price of an intangible element of the business fund, neither deductible nor depreciable)
- The benefit in kind in respect of the private use of all or part of an immovable registered in the assets of the enterprise by the individual operator free of charge
- Insurance premiums for contracts involving persons who do not meet the definition of "key man" insurance contracts and premiums for certain life insurance contracts
- Certain taxes (income tax, corporation tax, contribution onIS, etc.)
- The property tax on an immovable not on the balance sheet
- CRD and CSG for its non-deductible share
- Corporate vehicle tax (PST)
- The annual tax on offices in Île-de-France
- The remuneration of the individual self-employed operator and members of partnerships (on the other hand, the remuneration of the spouse or partner of Pacs of the individual operator, in the form of a salary subject to social contributions and contributions, is deductible, in full whether or not he is a member of a registered management center or a registered association, and regardless of the matrimonial regime)
- Lump-sum allowances for representation and travel expenses, if they are not added to salaries and entail excessive remuneration compared to salaries in the same industry.
Certain expenses, as a matter of principle deductible from income tax, may no longer be deductible if they are considered excessive, i.e. exceeding certain thresholds or not satisfying 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 and must be reintegrated into the result of the business. These expenses must be shown on the overhead statement 2067, if their total amount exceeds €3,000 (excluding advertising items, whose total value inclusive of tax must not exceed €69)
- Sponsorship expenses (incurred in connection with cultural, sports or artistic events) if the name or acronym of the company does not appear and/or the expenses are excessive in relation to the AC
- Staff costs and social security charges, if they are excessive in relation to the work actually performed
- Employee participation in profit and loss, if the participation or profit or loss agreements do not fulfill the legal conditions (collective and random character) and/or if they are not deposited with the departmental management of labor
- Presence tokens if they exceed a ceiling of 5% (annual average of the 5 highest paid if the company has a workforce of less than 200 employees, or of the 10 highest paid if the workforce exceeds 200) x number of directors. If the undertaking employs fewer 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 a debtor
- Interest on current accounts of members (interest paid in consideration of amounts temporarily made available to the company by the members), if the capital is not fully paid up and if they exceed the 1.47% for the 12-month period ended 31 December 2019
- Financial burden of companies subject to theIS if the total amount of the net financial charges exceeds the highest amount between €3 million and 30% income before taxes, interest, depreciation and depreciation
- Penalties and fines imposed by an administrative authority (examples: Urssaf, DGFIP, DGCCRF, Customs
- Donations to political parties or patronage expenses for certain works, as they benefit from tax reduction
- Tax reminders for non-deductible taxes
- Write-offs of commercial debt (sale, purchase of goods, provision of services), if they do not satisfy the interest of the holding
- Abandonment of financial claims (e.g. loan or advance).