Are my expenses business expenses or out-of-pocket expenses? What are the differences and impacts?
Expenses incurred to carry out a mission (e.g. travel, restaurant, telephone, etc.) are in principle classified as professional expenses.
These are expenses incurred in his name and on his own account. Their re-invoicing to the client will constitute additional remuneration (and therefore turnover) and will therefore follow the same tax regime as the fees invoiced for your mission.
Please note! The choice to re-invoice professional expenses may have an impact on your thresholds (VAT exemption, micro-enterprise regime).
This can lead to additional tax and social security contributions if the tax system does not allow the deduction of these expenses (e.g. the micro-enterprise system provides for a flat-rate deduction for professional expenses).
Conversely, disbursements respond to a very precise definition and formalism, covering in particular expenses incurred in the name and on behalf of a client.
The re-invoicing of disbursements is treated as the reimbursement of an advance and is therefore not subject to VAT and is not recorded as additional turnover (and therefore has no impact on the thresholds).
In order to issue a disbursement note, it is necessary to obtain the customer's written agreement and to have the purchase invoiced in the customer's name, keeping proof of purchase.
In practice, this scenario should not be the most common given the restricted framework in which the disbursements can occur.
What amount of expenditure should I retain to carry out the re-invoicing: the amount “excluding tax” or “including tax”?
The amount retained, excluding taxes (HT) versus including all taxes (TTC) will depend on several factors.
Starting with whether or not you are subject to VAT.
If you benefit from the VAT exemption, you cannot recover it on your expenses; the re-invoicing will therefore be done for its amount including VAT.
Whether you are subject to VAT will then depend on the rules applicable in the country in which you operate.
If these rules allow the recovery of VAT on your expenses (via the VAT declaration), then the re-invoicing will be done for its “excluding tax” (ET) amount.
How is the re-invoicing of professional expenses handled with regard to VAT (if I am liable)?
The re-invoicing of professional expenses follows the same tax regime as your mission fees.
Therefore, if your fees are subject to VAT, the re-invoicing will also be subject to VAT, at the same rate as your fees (and this, regardless of the VAT rate applicable to the expense).
For example, a catering expense that has supported VAT at the rate of 10% (e.g.: €100 excluding VAT + €10 VAT), the deduction of which is not authorized, will be re-invoiced for its amount including VAT (€110) and will then be subject to VAT at the same rate as your fees (e.g.: VAT of 20%, i.e. €110 + €22 = €132).