From September 2026, the French e-invoicing reform will become mandatory for all VAT-registered businesses. Its objectives are clear: fight VAT fraud, enable pre-filled VAT returns, and modernise business-to-business (B2B) transactions.
While most companies are preparing for supplier invoices, a critical but often overlooked area is expense reports (notes de frais). These seemingly small documents can have a disproportionate impact on VAT recovery and compliance.
This article explains how expense reports fit into the reform, the risks for VAT reclaim, and how companies can adapt their policies and systems to avoid losing recoverable VAT.
Understanding the French E-Invoicing and E-Reporting Reform
The reform distinguishes between two mechanisms:
E-invoicing
Applies to all B2B domestic transactions between VAT-registered entities in France. Invoices must be exchanged via certified Partner Dematerialisation Platforms (PDPs) or the Public Billing Portal (PPF).
E-reporting
Applies to transactions outside the e-invoicing scope, such as B2C sales, international operations, and payments where VAT is due upon collection. Businesses must transmit relevant transaction data to the DGFiP.
Together, these flows will give the tax authority near real-time visibility of taxable operations, forming the backbone of pre-filled VAT returns and tighter compliance monitoring.
Related: the EU VAT in the Digital Age (ViDA) initiative is setting a similar direction at European level.
Expense Reports (Notes de Frais) Under the Reform
Expense reports represent a grey zone between employee spending and company obligations. Employees often act as third-party payers when they pay for meals, travel, or other professional expenses.
There are three practical scenarios:
- Invoice in the company’s name
- The supplier issues the invoice directly to the company.
- Under the reform, this invoice must be processed through e-invoicing.
- VAT recovery is possible, provided the invoice is compliant.
- Invoice in the employee’s name
- The supplier issues the invoice to the individual, even though the cost is reimbursed.
- Legally, VAT is not deductible, as the company is not named as the buyer.
- The supplier must declare the transaction under e-reporting (treated as B2C).
- Till receipt (ticket de caisse)
- No formal invoice is issued; the employee submits a receipt.
- Such receipts are reportable under e-reporting but rarely support VAT deduction, especially above €150 (excl. VAT).
Flow of expense report scenarios under the reform
This multiplicity of flows means companies must adapt their Accounts Payable (AP) and Travel & Expense (T&E) processes to distinguish between deductible and non-deductible expenses, while staying compliant with DGFiP requirements.
VAT Recovery Challenges and Risks for Companies
1. Invoices in the Company’s Name
- VAT recovery: Allowed under Article 289 of the French Tax Code.
- Reform requirement: Must be processed via the e-invoicing network (PDP/PPF).
Case example: A consultant books a hotel, provides the company’s VAT number, but pays with their personal card. If the invoice does not flow through the e-invoicing system, VAT recovery could be questioned during an audit.
2. Invoices in the Employee’s Name
- VAT recovery: Not allowed. The company is not legally the buyer.
- Reform requirement: Declared under e-reporting as B2C.
Case example: A sales manager hosts a client dinner, but the restaurant issues the invoice in the employee’s name. Even if reimbursed, the VAT is lost.
3. Till Receipts (Tickets de caisse)
- VAT recovery: Strictly limited. Above €150, a full invoice is required. Even below, receipts must contain all mandatory VAT mentions.
- Reform requirement: Data must be transmitted via e-reporting.
Case example: Employees often provide taxi or fuel receipts. Without invoices, VAT is non-recoverable, leading to systematic leakage.
-> In summary: VAT recovery depends on correct document naming and flow mapping. Under the reform, the DGFiP will have direct visibility into these mismatches.
Compliance and Process Challenges
For CFOs and Tax Managers, expense reports present both an operational challenge and a compliance risk:
- Policy enforcement:Employees must request invoices in the company’s name—yet this is not always done.
- Workflow adaptation:AP and T&E systems must integrate with e-invoicing channels, while supporting e-reporting for non-eligible flows.
- Cross-border complexity:French e-invoicing overlaps with EU VAT refund mechanisms (8th Directive and 13th Directive). A hotel invoice in Germany submitted through an expense report must also meet EU refund requirements.
- Audit readiness:The DGFiP will cross-check e-invoicing/e-reporting data with VAT declarations. Errors in expense reports will no longer go unnoticed.
AFNOR XP Z12-014: Standardising Complex Scenarios
To support businesses, AFNOR published the XP Z12-014 standard in July 2025. This experimental standard describes the practical B2B use cases applicable under the French e-invoicing framework, in line with the European standard EN16931.
Among the use cases covered are situations involving third-party payers, such as employees incurring professional expenses. For expense reports, XP Z12-014 clarifies:
- How invoices and receipts should be structured in the e-invoicing model.
- How expense report data integrates into the life cycle of an electronic invoice.
- How statuses (issued, received, refused, paid, etc.) interact when an employee advances funds but the company is the legal beneficiary.
This guidance ensures consistency between supplier reporting, company accounting, and VAT reclaim, reducing the risk of misclassification. For CFOs and tax managers, it provides an authoritative reference on how to treat expense report flows within the reform — a key point when preparing for DGFiP audits.
Checklist: How CFOs and Tax Managers Can Prepare
Technology and Automation:
Securing VAT Recovery with VAT4U
Manual handling of expense reports is no longer sustainable. Companies need automation and AI-driven tools to bridge compliance and VAT recovery.
The AI-driven VAT4U engine provides dedicated modules:
- VAT4U-Calculate→ automatically determines VAT deductibility based on expense type, country, and tax rules.
- VAT4U-Comply→ validates invoices and receipts, flagging non-compliance with reform requirements.
- VAT4U-Enrich→ fills gaps in incomplete documents (e.g. missing VAT numbers), ensuring audit-proof records.
- VAT4U-Claim→ automates domestic and foreign VAT claims, aligned with DGFiP deadlines.
- VAT4U-Query Handling→ assists in responding to tax authority queries, including translation and summarisation.
By integrating with major AP and T&E platforms (SAP Concur, Amadeus Cytric, Expensya, HRS and more), VAT4U ensures expense flows are classified correctly and no deductible VAT is left behind.
Final Thoughts
Expense reports have long been an area of VAT leakage. Under the French e-invoicing reform, their treatment will be fully visible to the tax authority. Companies that fail to adapt risk losing recoverable VAT or facing compliance penalties.
By combining clear policies, aligned processes, and technology like VAT4U, businesses can turn expense reports from a compliance headache into a secure source of VAT recovery.
