Below is an inventory of the main expenses that companies subject to the Industrial and Commercial Benefits (B.I.C.) or corporate income tax in France can deduct to determine their taxable income. We first give a brief reminder of the general rules for deduction of these expenses then, we will expose the list of expenses classified according to the following main categories:
- Purchases and external charges,
- Staff costs,
- Miscellaneous expenses of current management,
- Financial expenses,
- Depreciation and provisions,
- Exceptional expenses and salary savings.
I – Conditions for deducting a charge from taxable profit
The deduction of a charge is possible only if it corresponds to the deduction criteria required by the tax rules:
- The expenditure must be made in the interest of the company and must not correspond to an abnormal act of management,
- It must result in a decrease in the net assets of the company,
- A voucher must be kept for proof,
- The expense must be recognized in the fiscal year in which it was incurred (and not at the date of payment if it occurs in another year),
- The expense must not be excluded by a tax provision (example: tax penalties, sumptuary expenses …).
II – Purchases and external charges
This item includes a very large number of operating expenses, it corresponds to all purchases of materials and services that the company makes from its suppliers.
1 – Purchases and incidentals
These are purchases of raw materials or goods and services intended for resale to which are added all ancillary costs (customs duties, transport, handling …).
2 – Rent and lease payments
This concerns the buildings and the equipment used by the company.
Amounts paid to the owner of premises for entrance fees may, in some cases, be considered as rent.
The amount deducted must of course correspond, for all rent, to the rental period covered by the fiscal year.
3 – Maintenance and repairs
To qualify as a deduction, these expenses must not lead to an increase in the value or the life of the property or building concerned. Otherwise, the maintenance costs must be recorded in the asset.
4 – Insurance premiums
The contracts concerned must cover one of the following risks:
- The loss of an asset of the company,
- Civil liability,
- A loss related to the loss of an executive (life insurance) under certain conditions only.
5 – Various charges such as
- Registration fees or brand renewal fees,
- Research and development expenditures,
- Expenses of software creation or website for the company.
6- Fees expenses
This is all the fees, commissions and brokerage fees paid to other people or other companies. The fees that must be included in the cost of a fixed asset are not included (example: Architect’s fees).
7 – Advertising, gifts, etc.
These expenses are deductible if they are incurred in the interest of the company. They are in principle deducted from the result of the commitment exercise of the charge.
Advertising expenses prohibited by the bar code are not deductible.
8 – Travel, missions, receptions
This paragraph concerns:
- Travel and incentive travel expenses at resellers,
- Fees for reception and representation,
- Transportation costs reimbursed to employees and officers,
- Meals and travel expenses of self-employed professionals under the “B.I.C.”
9 – Documentation, Training and Membership expenses
Training costs may include training for employees, managers or the individual operator.
III – Taxes
The professional taxes charged to the company are deductible if they concern mainly:
- C.S.G. (for the deductible portion),
- C.E.T. (territorial economic contribution),
- Taxes on turnover,
- Property tax,
- Taxes on salaries and training,
- T.V.S.(Tax on passenger vehicles) only for companies subject to income tax,
- Social Contribution of Solidarity (C3S). Etc…
The law has provided that certain taxes are not deductible, such as:
- Non-deductible share of C.S.G.,
- Income tax and corporation tax,
- T.V.S. for companies subject to corporation tax. Etc…
IV – Staff costs
1- Salaries and wages
These are all the amounts paid to the staff, the various remunerations and allowances (including severance or retirement benefits).
To be deductible, these amounts must pay for actual work and the amount must not be excessive in relation to the job concerned.
The remuneration of the individual operator or the partner of a partnership cannot be deducted from the enterprise’s result, indeed, these remunerations are included in the profit of the company because taxed in the category of B.I.C.
2 – Social charges on wages
Employer contributions related to the remuneration of employees are deductible, they must relate to wages paid during the fiscal year.
Some optional pension contributions (super-supplemental plan) are deductible.
3 – Social contributions of the operator
Non-salaried officers may deduct their compulsory social contributions and certain optional additional contributions listed by law.
V – Miscellaneous expenses of current management
This category of charges is more often used by medium and large companies than by small ones, it includes:
- Royalties for patents, licenses, trademarks or technical processes,
- Directors’ fees (jetons de presence).
VI – Financial expenses
1 – Interest on loans and other debts
These interests are only deductible if they are linked to an indebtedness recorded on the liabilities side of the balance sheet. In addition, the loan must have been taken in the interest of the enterprise.
2 – Interests of associates current accounts
Interests paid to shareholders on amounts advanced to the company in addition to their capital shares are deductible under certain conditions:
- The capital must be fully paid up,
- The interest rate is capped.
In addition, companies subject to corporation tax are submitted to a system of limitation of all financial charges. This device has just been revised by the finance law for 2019, we are at your disposal to provide you with the details of the text, feel free to contact us!
VII – Depreciation and provisions
1 – Depreciations
Fixed assets are depreciated during their period of use.
Certain elements such as land whose duration of use is not limited are not depreciable.
Goodwill can be depreciated, however the tax deduction is not always allowed.
There are many tax rules allowing accelerated or declining depreciation on certain assets. There are also possibilities of over-depreciation.
2 – Provisions
There are two categories of provisions:
- Provisions for losses and charges. The deduction conditions are as follows:
- The loss or charge must be probable,
- The probability must result from an event occurring during the financial year,
- The probable loss or charge must be tax deductible.
- Regulated Provisions. These are provisions specifically provided for by the tax law.
VIII – Exceptional expenses and salary savings
These are mainly:
- Losses on bad debt,
- Penalties, damages, indemnities,
- Procedural costs,
- Losses after a theft,
- Corporate sponsorship,
- Various losses,
- Employee incentive and payments on employee savings plans.
In addition to these charges, any capital losses realized on asset outflows may be added.
Do not hesitate to contact us for any question on this subject!
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