Until 2now, VAT incurred on passenger cars was excluded from the right to deduction in France, except for certain sectors such as vehicle resale, car rental, and driving schools.
In a tax ruling dated April 30, 2025, the French tax authorities have officially clarified the rules on VAT liability and deductibility for company cars, aligning with recent European case law.
Businesses that provide company cars to their employees can now deduct the input VAT incurred on the purchase or lease of these vehicles.
However, this VAT deduction is subject to several conditions:
• The vehicle must be made available to the employee on a permanent basis;
• The employee must be authorised to use the vehicle for private purposes;
• The employer must receive consideration in return for the private use.
The notion of consideration is broadly interpreted and is not limited to a payroll deduction. However, this consideration is itself subject to output VAT, to be collected by the company.
Since VAT is only due on the portion of private use, the amount of VAT payable is, in most cases, lower than the recoverable VAT. This will create a refundable VAT credit.
BTOBNICE, a tax consultancy firm specialised in VAT, supports businesses in VAT credit reclaim on company car fleets :
• Audit of your current practices
• Validation of your eligibility
• Identification of output and input VAT amounts
• Recovery of VAT credits from previous years
• Implementation and automation of future processes
Our service includes a legal opinion issued by an independent law firm, confirming your eligibility and the retained tax bases for calculation.
Don’t delay in recovering French VAT on your company cars for the current year, as well as for previous non-prescribed years.
📧 Contact our VAT experts today: contact@btobnice.com