An expense report is a document enabling a company to reimburse its employees for business expenses incurred on its behalf. French companies need to be aware of the requirements and responsibilities regarding expense reporting. In this article, we explain expense reports, including different types, how to create them, and how to reimburse employees.

What’s in this article?

• Definition of an expense report
  
• Different types of expense claims
  
• How to draw up an expense report
  
• Which tax system applies?
  
• How to reimburse employees
  
• Expense reports and value-added tax (VAT)
  

Definition of an expense report

An expense report is a paper or digital document that justifies the expenses incurred by a company’s employees. To be reimbursed for these business expenses, employees must submit an expense report along with the required supporting documents. Unlike bills and invoices, which are very similar, the expense report is a separate document.

This document can include various expenses, such as business meals, train tickets, purchases of computer equipment, or mileage expenses. The most important quality of these expenses is that they are clearly in the company’s interest. It’s up to the company to validate these expenses in advance, ensuring employees only commit money they will be able to claim back.

Different types of expense claims

There is no exhaustive list of expenses eligible for reimbursement. Reimbursable expenses depend on your company and employees’ and managers’ requirements.

The most common types of expense claims include:

• Business travel (e.g., mileage)
  
• Meals (e.g., restaurant bills)
  
• Accommodations
  
• Subscriptions (e.g., telephone or internet)
  
• Telecommuting
  

For example, if an employee has an important meeting with a client in Lyon and travels there by train from Paris, they will then need to prepare an expense report. This would include the following expenses:

• Round-trip train ticket from Paris to Lyon
  
• Cab from the station to the client’s company
  
• Meal with the client
  
• Night’s accommodation in Lyon
  

The employee must pay these expenses in advance and draw up an expense report to obtain reimbursement.

How to draw up an expense report

Although an expense report is an official document that must contain certain information to be valid, there is no legally imposed model. Companies are free to create their own expense report templates, including the elements typically found on this type of document:

• Employee’s name
  
• Date
  
• Location
  
• Purpose/description of expenses
  
• Amounts incurred, excluding tax (HT) and including tax (TTC)
  

As a general rule, each expense claim must be accompanied by the corresponding paid invoices and supporting documents. This can include train tickets or receipts for meals.

In France, the portal for the digital transformation of companies recommends digitalizing expense reports, but this practice is not yet compulsory.

Which tax system applies?

Almost all companies can use expense accounts to reimburse their employees for business expenses. However, sole proprietorships (EIs) have a special feature: expense reports do not apply.

In fact, self-employed workers are not entitled to reimbursement of business expenses. This is because they benefit from a flat-rate deduction applied directly to their sales, regardless of the actual amount of their expenses. This system simplifies administrative and tax management for self-employed workers.

Under other tax regimes, expense reimbursements are generally deductible by the company, provided they comply with the applicable standards.

How to reimburse employees

Obligations

Reimbursement procedures vary from company to company. There is no legal deadline for companies to reimburse expenses.

When it comes to managing expense claims, companies have a choice of different solutions. Larger companies often opt for dedicated management software, enabling digital transmission of claims. Smaller companies can opt for a simpler solution, such as sending receipts by email.

However, proof of expenditure is required for all reimbursements, regardless of the procedure chosen.

Flat-rate reimbursement

As an employer, you can reimburse expenses on a lump-sum basis, up to the Urssaf maximum. If the employee’s actual expenses exceed this flat rate, the company is responsible for the difference. For example, an employee who eats meals at work can receive up to €7.40 per day, paid by the company. This is the maximum amount that will enable the company to benefit from an exemption from all social security contributions.

If the company opts for a flat-rate reimbursement, the employee will have to declare the reimbursement in certain cases, particularly if the amount exceeds the limits set by the tax authorities.

Actual reimbursement

In the case of actual reimbursement, the employer reimburses the exact amount spent by the employee. This can only occur if the expense report is in order and the expenses incurred are eligible. In this case, the employee does not have to declare the reimbursements, as they correspond exactly to the expenses incurred.

Stripe Issuing enables companies to efficiently manage their employees’ expenses. This solution offers real-time visibility of payments and the ability to set spending limits to avoid excessive expense claims.

Expense reports and value-added tax (VAT)

Only companies subject to VAT can reclaim this tax on their expense reports. If your company is not subject to VAT—or if your sales are below the established thresholds—you will not be able to reclaim the VAT.

To reclaim deductible VAT on expense claims, VAT-registered companies must retain original receipts showing the VAT amount for eligible expenses, such as restaurant meals and accommodations. Transportation costs are not taken into account, except in certain circumstances (e.g., tolls on certain freeways, train tickets for business trips).

Expense reports must be itemized, clearly indicating the VAT for each item and separating the net amount, VAT, and total. Reclaimable VAT should then be added to the relevant VAT return. It is important to keep receipts as proof in the event of an audit.