The expense report is used to prove any work-related expense incurred by employees. Also called business expenses or expenses claim, the expense report is used for the reimbursement of the employee. It also enables the company to prove the expense, when requested by tax authorities, for example.
A company's expense accounts cover several types of work-related expenses. This includes meals, travel and accommodation, and expenses incurred for clients.
Which Business Expenses Can Be Reimbursed?
Usually, the expenses that can be reimbursed are strictly regulated. This is the case in France, where expenses must be incurred for the purposes of the company's activity. Some expenses must also comply with the social security and tax administrations’ rules.
- Travel Expenses
Travel or transport expenses include both travel during working hours and travel to and from work.
Some travel expenses must be reimbursed by the employer. This can be the case for employees commuting by public transport. In France, the company must contribute 50% of the cost of the public transport pass. For business trips, the employer will have to reimburse train or plane tickets, car rentals or costs resulting from the use of a personal vehicle (according to a tax rate that takes into account the power of the vehicle and distance travelled). Typically, companies' travel policies are aligned with the government's social security exemption criteria.
Some other travel expenses may be reimbursed by the employer, without the reimbursement being mandatory. In this case, the company sets its own reimbursement limits. In France, there is no obligation to reimburse the cost of travelling to and from work with a private vehicle. But it is possible to ensure the reimbursement with waiver of social security contributions under certain criteria.
The new sustainable mobility package, applicable in France, aims to promote alternative modes of transportation. This lump sum is tax and social security exempt for the employer and is limited to €500 per year per employee in private companies since 1 January 2021. For the civil servants, the lump sum is €200 per year. This package covers the costs of purchase and maintenance of bicycles, car-sharing, electric, hybrid or hydrogen vehicles, and individual modes of transport for hire or self-service (bicycles, scooters, etc.).
- Accommodation Expenses
Accommodation expenses are those incurred by the employee during business trips where it is not possible to return home. Reimbursements of these expenses are subject to a scale for exemption from contributions when the reimbursements are per diem. On this scale, costs on French Territory (mainland and overseas) and abroad are distinct.
- Meal Expenses
Meal expenses or catering expenses refer to all out-of-home meals taken for work-related activities. These costs cover lunches on working days whenever it is not possible to return home. They also cover dinners and breakfasts during extended business trips. Finally, meal expenses also cover business meals with clients and team meetings.
Reimbursement is usually compulsory if the journey between the company and home is too long in relation to the break time, if the employee has to eat at the workplace or if there is no canteen at the workplace. Finally, collective labour agreements may provide for special arrangements for meal expenses.
- Remote Work Expenses
The Covid-19 crisis has forced many companies to use remote work to maintain their business operations, with almost one in five workers working remotely in November 2020 in France. Although remote work had decreased by the beginning of 2021, it became compulsory again wherever it was possible during the 3rd lockdown in France. Expenses incurred by an employee for working remotely are business expenses.
In France, URSSAF has set up a table for evaluating the expenses incurred by employees working remotely, indicating the types of expenses that can be reimbursed. This includes the cost of furniture, computer equipment or the costs for converting a room into a workspace.
- Other Expenses
Other business expenses can be reimbursed, such as customer gifts. Subscriptions to an internet service, purchases of office supplies or furniture or computer equipment can also be treated as business expenses.
In June 2021 Jenji launched an Index to assess trends in business expense management processes. The Index, which is updated every six months, includes management developments in response to the Covid-19 crisis and new strategies adopted by CFOs and HR managers.
Difference Between Actual and Per Diem Reimbursement
The employer has two ways of reimbursing expenses: actual reimbursement and simplified (per diem) reimbursement.
The per diem reimbursement is aligned with the social security tables to allow exemption from taxes. Per diem reimbursement exceeding the tax scale may be regarded as income in kind if the expenses are not substantiated. Per diem reimbursements are often used for predictable expenses, such as recurrent expenses. The company pays the employee a sum of money every month for business expenses. If the employee exceeds the allocated per diem amount, the excess will not be reimbursed. If they do not spend the full amount, they do not have to repay the overpayment. No supporting documents are required for per diem expenses.
In the case of actual reimbursement, the employee is reimbursed the exact amount of the expense after it occurred. Reimbursement can only be made with proof of expense. The receipt proves that the expense was incurred and that the expense is related to the employee's business activity. These expenses are also exempt from social security contributions, without limit, provided that receipts can be produced and that the expenses were necessary and work-related for the employee.
Companies can reclaim the VAT on expense claims reimbursed on an actual basis. However, the conditions for recovery can be strict, as it is the case in France:
- The expenditure was necessary and in the interest of the company
- Expense claim receipts exist and are valid
- The receipts mention the amount before tax as well as the VAT amount
- The expense was made on behalf of the company (mention on the receipts)
- VAT is payable by the supplier
Some costs are not eligible for VAT recovery. This is the case in France for mileage expenses and overnight stays in hotels or accommodation services (unless the expense is incurred for a client). Finally, for meal expenses, an invoice is compulsory for meals where the amount before tax exceeds €150.
Companies can optimise their VAT management with a management software, which is particularly useful for the now entirely paperless intra-Community VAT. In order to use the full-optimisation potential of the software, Jenji hosted a webinar to recover VAT and gain in productivity.
What Should an Expense Report Contain?
The expense report is required to contain specific information, in particular for exemptions from contributions and VAT recovery:
- The identity of the employee who made the expense
- The employee's department
- The date on which the expense was incurred (which must correspond to the date of the receipt)
- The amount of expenses incurred by the employee, exclusive of tax and including VAT
- The VAT corresponding to the expense
- The reason for the work assignment that incurred the expense
- A classification of expenses by category (meals, accommodation, travel)
There are no formalities for recording expense claims.
Optimising Expense Report Management
Artificial intelligence (AI) now allows for significant optimisation of business management. Expense management is one of these areas where optimisation is possible. A dedicated solution that integrates with the company's digital environment is a valuable choice for both large companies and SMEs.
The switch to digitised receipts based on a simple photo taken by the employee limits the loss of receipts and unclaimed expense accounts. Processing can be done in real time, with anomaly and fraud detection for a more dynamic reimbursement process. Finally, the management software helps to reduce management costs and to restore control over expenses and financial decisions.
For more details on helping you to implement effective expense management solution in your company , 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.