News - Re-invoice Professional Expenses
To re-invoice professional expenses, it is essential to keep detailed accounting records to be able to track the professional expenses incurred, their amount, their nature, and the applicable VAT rate.
To help professionals in this task, the N2F expense report management application can be used to generate expense reports in order to avoid any errors or delays in managing the re-invoicing of professional expenses.
Re-invoicing expenses: what does it mean?
Re-invoicing expenses enables service providers to be reimbursed by the client company for expenses incurred when providing a service.
The main expenses re-invoiced are:
· Travel Expenses
· Accommodation Costs
· Meal Expenses
To be able to re-invoice expenses, the service provider must obtain the client company’s prior agreement to include these costs in the quotation and invoice.
For greater visibility, and depending on the number of costs that are likely to be re-invoiced to the client, it is also possible to send a separate invoice in addition to the main invoice for the performance of the service.
Re-invoicing expenses: a maximum amount?
There is no legal maximum amount for the expenses re-invoiced. It is essentially a matter of respecting the agreement with the client company that has undertaken to reimburse the costs incurred by the service provider.
Depending on the nature of the service, the amount of travel and accommodation expenses re-invoiced to the client company may therefore vary.
In addition, the amount to be re-invoiced must also take into account VAT and in particular whether it is deductible or not.
When the VAT on the re-invoiced expenses is deductible, the service provider must invoice its customer for the amount excluding VAT. The service provider will then be able to recover the VAT on the costs it has incurred when performing its service. The usual VAT declaration procedure remains applicable in this case.
When re-invoicing expenses that are non-deductible for VAT purposes, the service provider will need to issue invoices for the amount including VAT.
Note that some professionals generate a margin when re-invoicing their expenses by invoicing the amount they paid (including VAT) as though it excluded VAT. This enables them to achieve a margin equivalent to the amount of VAT. Although this practice is not illegal per se, it is generally perceived to show a lack transparency with regard to the client company.
Re-invoicing expenses and VAT: examples
Re-invoicing expenses with VAT does not follow the same rules as disbursements.
As a reminder, the practice of re-invoicing expenses corresponds to the advance payment of professional expenses by the service provider. If the client company agrees to this practice, it may subsequently reimburse the service provider for professional expenses relating to the engagement, such as travel expenses. In this case, the service provider can re-invoice the expenses to its client excluding VAT if the VAT is deductible. It can then recover the VAT for its own account.
A disbursement is an expense incurred by the service provider on behalf of a client company. The invoice is therefore drawn up in the name of the client company. For a disbursement, the VAT cannot be recovered by the service provider. The service provider is reimbursed for the expenses actually incurred.
As an example, note that VAT on hotel accommodation costs is not deductible. A service provider who pays €80 for a night in a hotel will therefore have to re-invoice this accommodation expense at €80 including tax.
Re-invoicing expenses: save time!
To re-invoice expenses you need to have mastered the notion of deductible and non-deductible VAT and of invoicing excluding or including VAT, etc.
This can quickly become an onerous task. You can optimize the management of your expense re-invoicing by using N2F expense report management software, which offers all the necessary functionalities to quickly edit and manage expense reports.
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