Lavish Expenditures: Expenses Prohibited by the Tax Authority 2026

Updated March 2026 - In the quest for tax optimization, some entrepreneurs are tempted to have their company bear costs linked to their lifestyle or personal passions. However, the General Tax Code (CGI) has erected an insurmountable barrier: luxury expenditures.

Even if these expenses are real, justified by an invoice and paid with the company's account, the tax administration prohibits their deduction from the taxable profit. Ignoring these rules means exposing yourself to automatic tax reinstatement, lost VAT and, in the most serious cases, prosecution for misuse of corporate assets.

The law identifies four specific categories of expenses which are presumed never to be incurred in the direct interest of the operation, unless there is very specific proof of the corporate purpose.

A. Hunting and Fishing

All expenses linked to hunting (rental of an estate, gamekeeper, equipment) or non-professional fishing. Vigilance: Even if you invite customers during a hunt, the tax authorities will reinstate the costs incurred.

B. Yachts and Pleasure Boats

The purchase, maintenance, insurance and fuel of sailing or motor pleasure vessels are never deductible. Note: Even if you put your company logo on the case for so-called "advertising", the charge remains lavish.

C. Pleasure and Amenity Residences

These are villas by the sea, chalets in the mountains or prestigious apartments used for leisure. These charges are excluded, unless the premises are necessary for production or the actual head office.

D. Tourist Vehicles (The excess part)

This is the most common point of friction. The depreciation of passenger cars (subject to company car tax or annual emissions tax) is capped. The 2026 Ceilings:

• ▸Electric Vehicles: Deduction up to €30,000.
• ▸Hybrid Vehicles (< 50g CO2): €20,300.
• ▸Polluting vehicles (> 160g CO2): Only €9,900. The entire fraction of the purchase price above these ceilings constitutes a non-deductible sumptuary expense.

What happens if you “forget” to reinstate these charges?

1. ▸Reinstatement of profit: If you paid €10,000 for the rental of a yacht, your accountant must add €10,000 to your tax result. You will pay corporate tax (IS) or income tax (IR) on an amount that you have spent.
2. ▸Double VAT sanction: The VAT on these expenses is never recoverable. If you deducted it, you will have to repay it with 10% or 40% penalties.
3. ▸Distributed Income (SAS/SARL): For IS companies, these sumptuary expenses are considered "hidden" dividends paid to the beneficiary (Article 111 e of the CGI). Result: Flat Tax of 30% plus surcharge for non-declaration.

We must not fall into paranoia, certain situations allow the deduction:

• ▸The direct corporate purpose: A company whose activity is boat rental or the organization of professional safaris naturally deducts these costs (these are its work tools).
• ▸Residences of a social nature: Rest homes, holiday centers for employees managed by the CSE, or company holiday camps.
• ▸Normal reception costs: A business dinner at a restaurant with a prospect is not lavish, provided that the amount remains proportionate to the turnover and that the guest is identified.

[!CAUTION] The administration tracks down “disguises”. A “Provision of Coaching Services” contract which is actually used to finance access to a private hunting club is tax fraud that is easy to detect during an audit of accounts payable.

A manager buys a villa in Provence via his consultancy SAS, arguing that he will receive international clients there. He deducts €25,000 in gardening and swimming pool costs. Tax authorities' verdict: Total reinstatement of €25,000. Requalification as a benefit in kind for the manager. Reminder of IS, reminder of social security contributions and personal income tax on the €25,000. The final bill is 1.5 times higher than the initial expense.

• ▸Can I deduct a golf club subscription? No, unless it is for a one-off customer event, and even then, the tax authorities are very restrictive.
• ▸And utility cars (LCVs)? LCVs (2 seats, no rear rows of seats) are not affected by the luxury spending limits. They are 100% deductible.
• ▸How ”‹”‹to regularize? By an extra-accounting reintegration on the tax return (line 204 of the 2058-A declaration).

The company is not a cash drawer for private passions. Before making a so-called “prestige” purchase through your company, calculate the actual cost net of tax. Often, it is financially healthier to grant yourself an exceptional dividend and pay for the purchase in your own name.

📞 Do you want to audit your expenses to secure your balance sheet? Our tax specialists screen your third-party accounts to identify sumptuary risks before administration. Request a quote for a preventive tax diagnosis

(Official sources: Article 39-4 of the General Tax Code, BOI-BIC-CHG-30-10, Article 111 e of the CGI)