VAT recovery on expenses is financially significant for companies. It is possible to recover VAT on different expense categories, but it is not automatic…
Companies all have at least one thing in common: they have to manage their employees’ expenses. Indeed, they have a legal obligation to reimburse their employees their professional expenses. However, is these expenses are justified and necessary to the company’s activity, it can recover VAT. Even so, this is not automatic and only affects some expense categories.
First and foremost, for the employer to recover VAT on any of the employees’ expenses, these need to be professional expenses. Indeed, not all the employees’ expenses qualify for reimbursement by the company. Some rules and constraints apply…
Rules applying to VAT recovery
Even if you are dealing with professional expenses, your company will not necessarily be able to recover VAT on these. You first have to check these expenses meet some criteria:
- Check these expenses are in the company’s interest and necessary to its activity.
- Expenses must come with written proof (invoice, receipts, etc.) featuring VAT paid
- Written proof must feature the name of the company, not of the employee
- The company issuing the invoice must be VAT registered
Finally, it is important to keep in mind that not all the expense categories are eligible for VAT recovery.
When can you recover VAT on travel expenses?
First of all, if your employees travel by train, by plane, or by boat, your company will not be able to recover VAT: these means of transport are not eligible for VAT recovery.
It is also the case for mileage allowances: these are not eligible for VAT recovery. However, fuel expenses are.
VAT recovery on fuel expenses
Currently, VAT recovery on diesel fuel is still more profitable than on petrol. The rules on these fuels will be standardised over five years: the French state will align the percentage of petrol VAT recovery on that of diesel fuel—which will be 100% after 2022.
VAT recovery on fuel expenses applies to company vehicles as well as to personal ones. However, for the latter, it is necessary to prove that the fuel expense was incurred in a professional activity.
VAT recovery on toll and parking fees
As is the case for fuel, VAT can be recovered on toll and parking fees. Of course, such recovery is only possible if such expenses were incurred for company-related travel.
Moreover, these expenses must be justified, so there must be written proof of expense. For these to be valid, they must feature:
- The name of the company
- The name of the employee using the vehicle
- The address of the company (head office)
- The vehicle’s registration number
- The reason for travelling
As for parking fees, VAT recovery is only possible for parking sports which are:
- Customer only
- Visitors only
- Employees only
VAT recovery on accomodation fees
When your employees have to stay at a hotel (or a similar accommodation), you can recover VAT on their expenses.
However, as always, these expenses must be in the company’s interest. Moreover, the invoices must be made in the company’s name, and absolutely not in the employee’s. The employee’s identity must feature on the document however (it can be added by hand).
Additional accommodation-related charges such as breakfasts, meals and drinks had at the hotel must not be forgotten, because they are also eligible for VAT recovery.
Qualifying expenses as professional to recover VAT
Even if no client is invited, VAT can be recovered on restaurant and other reception expenses. As for accommodation, they must be justified with a proof of expense featuring the name of the company and also those of the employees (and any potential guests).
For restaurant expenses above 150€, an invoice to the company name is required. It must also feature essential information like the caterer’s name and address as well as their intra-community VAT identification number. A detailed breakdown of the TVA rates and amounts must also be featured, as well as sum totals excluding and including tax. For expenses below 150€ however, the receipt can be enough, as long as it features the amount paid (including and excluding tax) and the amount of VAT paid.
Note: VAT on alcoholic drinks had during meals is also eligible to recovery.
VAT recovery for miscellaneous expenses
For miscellaneous expenses like office supplies or phone plans, it is also possible to recover VAT by respecting the conditions mentioned above.
Moral of the story: use an optimised solution to manage VAT recovery
Given the financial significance of VAT recovery for companies, it is important to be well organised and to have an optimised tool to avoid any oversight.
Jenji is that kind of tool. Indeed, we make it possible for companies to configure their accounting rules. They can for instance specify which categories (like fuel) are eligible for VAT recovery. This is an efficient way to manage expense reimbursement, with no need for obscure spreadsheets, and which leads to 2-3% gain in recoverable VAT (an immediate and measurable ROI).
Moreover, Jenji also supports multiple VAT rates, for companies who need to manage different rates for the same expense.
For more details on Jenji, don’t hesitate to contact the Jenji team at firstname.lastname@example.org. We will be glad to assist you in setting up your project.