All a freelancer needs to know about deductible expenses in France

A new year begins and, for freelance workers in France, so does a new page of annual accounting. If you’ve never been sure exactly which business expenses you can remove from your income statement, then make this the year you get it right. The year you claim back every single cent you’re entitled to. The year you stick it to the system.

So which freelancers are concerned?

Only those with a legal status of EURL, EIRL or SASU can claim the following items back as business expenses. Why? Because those with micro-enterprise status are taxed on their revenue, and not on their net income; the deduction is ‘built in’ to the micro-entrepreneur’s simplified tax system, or so argues the tax office.

But if you’re an EURL, an EIRL or a SASU freelancer, you can tie some expenses to your business, rather than to you personally. Which ones? Let’s take a look...

For an expense to be considered deductible, it must meet three criteria:

1. It must have been incurred during the current tax year.
2. It must be accompanied by proof of payment. The tax office requires you to keep (and provide on demand) invoices, paper receipts or digital receipts for a period of 10 years.
3. It must be incurred for the purposes of your business (for example, a software that improves your daily business performance).

Whatever your freelance activity - whether you’re a photographer, decorator or web designer - the process of deducting expenses is the same. When you fill out your tax form, you must include (and be able to prove) the total amount of your deductible expenses. This sum will be subtracted from your net taxable income, which determines how much tax you’ll pay. The lower your net taxable income, the less tax you’ll owe.

Your freelance missions can require you to travel from one place to another. To a customer’s office, a site, factory or conference, for example. If you take the train, plane, boat, hire a car, pay road tolls or put gas in your car, these costs can be attributed to your company and not to you as an individual. If you use your personal car for professional travel, be aware that there is a specific set of rules, including a rate-per-km that applies for the deduction - you’ll find more details here on the URSSAF website.

Freelancers often eat their lunch at their place of work, whether it’s at home or on site. The tax authorities have set a flat value of €5 (including tax, as of 2021) for a meal eaten at home. This is not deductible. Only meal costs necessary to the running of your business qualify.

However, in certain situations, including for those who travel for work or who take a customer to lunch, there’s an exemption limit of €19.10 in qualified meal expenses per day. This means that you can deduct a maximum of €14.10 for you and your client’s meal (€19.10-€5 for your “home meal cost”).

For full details about how to calculate meal deductions, visit the French Service Public website.

Any tools or equipment you need to do your job as a freelancer can be subtracted from your net taxable income. That could be an internet connexion, a company telephone, accounting software or, in more specific cases, things like cameras for freelance photographers, text books for freelance teachers and so on. As long as you can justify that the material benefits your business, you can deduct what you pay for with your business card from your income statement.

If you are a freelancer working from home, you can make part of your rent a deductible expense. There are some admin hoops to jump through, as you may well expect: you must set up what’s called, in French, “une convention d’occupation” (occupancy agreement) between yourself and your company. Then, you must pay your company real-estate contribution, a business rates tax known in France as the “cotisation foncière des entreprises” or CFE. This is calculated according to the space required for you to work: so, if your office takes up 9m² out of an apartment that is 30m², you pay 9/30ths of the CFE.

Paying for a coworking space is becoming a popular option for freelancers who would prefer not to work from home. These flexible office solutions allow you to network, socialize and enjoy office services that are often better suited to work than an apartment. The good news for such freelancers is that coworking subscriptions are considered deductible expenses.

Costs incurred in the six months prior to creating a company are also deductible. They include but are not limited to: administrative fees (”frais de dossier”), fees paid to open a business account, accountant’s fees, the cost of creating a website etc.

Paid advertising allows you to reach a larger audience and promote your company. Advertising costs (digital/press/radio advertising and so on) are deductible as long as they are relevant to your business activity and are used to promote your company.

The same rule applies to training: if a training course is in the interest of your business, you can deduct it from your taxable income.

Personal spending may not be deducted from your income statement. That includes things like gym membership, cinema tickets, Netflix or similar subscriptions, as well as parking fines (even if they were incurred while you were travelling for business reasons).

The purchase of clothes is not considered a deductible expense, even if the clothes you buy are worn for work reasons. Clothing comes under personal costs.

Deductible expenses can be very useful in reducing your tax bill. The money you save can be pumped back into your company and used to grow your business. When you complete your tax declaration, make sure to collect all the necessary receipts and proofs-of-purchase.

Also, bear in mind that tax inspectors can ask to see any invoices and receipts generated in the past 10 years. You will also need to prove that the purchases were real and in the interest of your business. Keeping all that paperwork in separate folders, filing cabinets or shoe boxes isn’t ideal, but digital tools can help: with Qonto, for example, receipts can be digitalized and stored in your online app, where it will keep the same legal value as a paper version.