La Minute Tax

Every week, the Tax minute with our partner Aurélie Maudhuy !

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• VAT: Provision of vehicles by a company to its employees

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The tax administration published a rescript on 30 April 2025 (ref. BOI-RES-TVA-000161) on the VAT consequences of the decision taken by a company to make vehicles available to its employees for both professional and private use.

According to this rescript, employers who provide their employees with a vehicle for a stipulated consideration at the expense of the employee must subject this service to VAT.

The administration states that, in accordance with the principles established by the Court of Justice of the European Union (in particular, aff. C-288/19, QM v Finanzamt Saarbrücken), compensation exists in particular (i) in the event of a gross or net deduction from salary, (ii) in the event of a payroll deduction accompanied by the use of a credit of points convertible into additional salary and (iii) in return for a sum allocated by the employer convertible into additional remuneration.

On the consequences of this VAT taxation in terms of the right to deduct, the administration adds that” when the vehicle is intended, as soon as it is acquired by the company, to be made available permanently, with consideration, to one of its employees, the VAT charged with this acquisition is not excluded from the right to deduct. In fact, this tax is borne in respect of the acquisition of a vehicle intended to be rented. Therefore, it is fully deductible, without there being any need to apply any reduction according to the duration of private use. ”.

The challenge relating to this rescript is such that, historically, French businesses do not benefit from the right to deduct VAT on expenses relating to passenger vehicles (i.e. those designed to transport people or for mixed uses) in accordance with an exclusion measure provided for by law. This rescript therefore opens up the possibility for businesses to recover VAT on expenses incurred for vehicles used by their employees in the context of their professional activity and for their personal needs.

In practice, questions arise as to the methods of application, for example on the onerous nature of the service provided or on the amount of the tax base. French companies largely provide company vehicles to their employees, in return for which they generally deduct an amount of wages determined in accordance with the rules applicable to benefits in kind in terms of social security contributions.

Therefore, I invite businesses to:

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- check the current contracts concluded with their employees to assess whether the provision of vehicles has the characteristics of a service provided at a fee, in the presence of a stipulated consideration, and therefore subject to VAT;

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- control the management of the declaration and payment of VAT due in France on the provision of vehicles under current contracts and affected by the measure, both for the future and for the past with the possibility of repairing omissions in deduction rights;

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- study the opportunity offered to benefit from a right to deduct in full the VAT paid on vehicle expenses, in particular if the provision of vehicles should not currently meet the conditions to be subject to VAT.

This subject concerns both taxation and social law. As a tax lawyer at the multidisciplinary firm Squair, I remain at your disposal with my partners specialized in employment law to assist you on all aspects of this subject.