French VAT deduction limits
As a general rule, French VAT can be deducted as long as it is incurred for business purposes and all formalities are met. More specifically, the following deduction rules apply:
- Input VAT on hotel accommodation of employees is not deductible. Where these costs are incurred by third parties and the business purpose test is met, 100% deduction is allowed.
- VAT on restaurant meals is deductible as long as the name of the company is stated on the invoice.
- Input VAT on conferences, fairs and exhibitions is normally 100% deductible.
- Taxi, car rental, car repair, train and bus expenses are 0% deductible. Motorway tolls are 100% deductible.
- Entertainment expenses are generally 100% deductible.
- With respect to fuel expenses, VAT on diesel is 80% deductible, but petrol is 0% deductible in 2016 and 10% in 2017. VAT deduction allowance on petrol will increase gradually in the next years. See more information on expected VAT deduction on petrol expenses.
- Expenses on gas-fuel such as kerosene are 100% deductible.
- Business gifts are not deductible if the value exceeds €65.
Deducting VAT prior to the beginning of the economic activity is only allowed under certain conditions. The expenses should be connected with the expected business and, more importantly, a compliant invoice must be issued for these costs.