Deduction of VAT on company vehicles - Parliamentary question by Deputy Thierry Liger

background

On 23 June 2025 (published on 24 June), the Deputy asked the Government to specify the conditions for applying the rescript published on 30 April 2025 (our article on the subject).

As a reminder, this ruling confirmed the position of the CJEU rendered in the QM judgment (CJEU, C-288/19, QM v Finanzamt Saarbrücken). The French tax authorities now specify that the providing a vehicle to an employee is a transaction subject to VAT, as long as compensation is paid by the employee, in particular in the form of a payroll deduction.

This change in approach has two main consequences:

• The company is required to collect VAT on the compensation paid by the employee (payroll deduction, lump-sum reimbursement, etc.);
• In return, the company is entitled to deduct VAT borne on the expenses related to this provision, including the VAT charged the acquisition or rental of the vehicle concerned.

In this context, many operators encounter difficulties in identifying whether they are in a situation of being made available at a cost. In this context, the deputy requested details from the government.

The question

Deputy Thierry Liger officially questioned the Minister of the Economy on a major fiscal issue for many French companies: the regime of VAT applicable to company vehicles made available to employees. This approach aims to legally secure a very widespread practice and to align it with an economic and European interpretation of tax law.

In a rescript dated 30 April 2025, the French tax authority specified what it considered to be a consideration, citing for example:

• A direct deduction from the salary (gross or net).
• The use by the employee of “credits” that can be converted into wages.
• A specific sum paid by the employee.

The core of the problem: In-kind benefits as a trade-off

The whole question raised by Mr Liger lies in the most common French practice. In France, the provision of a vehicle is very mostly valued as a benefit in kind. This amount is calculated (using a flat rate or real method) and integrated into the gross remuneration of the employee, at the top of the pay slip. It is therefore subject to social security contributions and income tax.

The deputy's main argument is that this entry on the pay slip is indeed a real and valuable consideration. Economically, allocating part of the gross salary to this benefit is the same as drawing a deduction from the net salary: in both cases, the employee “finances” the use of the vehicle by part of his total remuneration agreed with the employer. This vision is also supported by the German tax authorities, which ruled that the work of the employee himself could constitute the consideration, as long as this exchange is contractually provided for.

The requests of the parliamentarian

Faced with this ambiguity, Mr Liger asks the Government to confirm three essential points in order to clarify the situation:

1. The benefit in kind is indeed a quid pro quo : He asks to recognize that the valuation of the benefit in kind on the pay slip, which in fact reduces the “cash” salary that the employee could have received, constitutes a consideration for the provision of the vehicle.
2. The tax base is the value of this benefit : He wants the value of this benefit in kind, as calculated for social security contributions, to be recognized as the basis on which VAT should be applied.
3. Distinction with non-employee managers : It requires a clear distinction between this case and that of a non-employee manager who would benefit from a vehicle without any identifiable compensation, a situation where the advantage would then only be evaluated for income tax.

A positive response from the minister would provide a legal and financial security Welcome to businesses, by validating their right to deduct VAT on a large part of their car fleet (while collecting VAT on the supply).

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The question is reproduced below:

Mr. Thierry Liger draws the attention of the Minister of Economy, Finance and Industrial and Digital Sovereignty to the VAT regime applicable to the provision by a company of company vehicles to its employees. In a judgment of 20 January 2021 (aff. C-288/19, QM v Finanzamt Saarbrücken), the CJEU recalled that the provision of a vehicle by the employer to his employee constitutes a provision of services in return for consideration when it gives rise to compensation.

In application of this case law, a rescript published in BoFiP on 30 April 2025 (BOI-RES-TVA-000161) specifies that the provision of a vehicle is subject to VAT when a consideration is stipulated between the company and the employee. Correlatively, the VAT charged on the purchase or rental of the vehicle is fully deductible. The abovementioned rescript adds that, in accordance with the principles established by the CJEU, consideration exists in particular (i) in the event of a deduction from gross or net 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.

As a reminder, following the judgment of the CJEU QM, which followed a German question referred for a preliminary ruling, the German Federal Finance Court (Bundesfinanczhof, judgment of 30 June 2022, V R 25/21) ruled that the provision of a vehicle to an employee constitutes an expensive service, as long as it is analyzed as an exchange: the consideration for this provision may be constituted by work of the employee, provided that this compensation in kind is provided for by contract, that it is valuable and that it presents a direct link to the benefit granted.

In France, companies very widely value the provision of a company vehicle to their employees on the basis of a salary amount determined according to the rules applicable to benefits in kind in terms of social security contributions, whether it is the lump-sum method or the real method.

This amount, reported at the top of the pay slip, constitutes an element of the gross remuneration agreed with the employee, valuing the work done in exchange for the provision of a vehicle. Economically, this allocation of part of the gross remuneration, agreed upon by contract, has the same effects as a contribution deducted from the employee's net salary at the bottom of the pay slip.

In this context, it asks the State party to specify that the provision of a company vehicle to an employee must be considered to be made at a cost when it gives rise to a valuation on the pay slip giving rise to a deduction from the gross salary or to a reduction in it, this contribution being valued, where appropriate, in accordance with the rules applicable to benefits in kind in terms of social security contributions and directly linked to the use of the vehicle. It asks him to specify that this valuation, agreed between the parties, constitutes the VAT tax base for the operation of providing the vehicle to the employee since this valuation is not, in practice, of a symbolic amount.

Finally, it asks the State party to specify that this situation is different from that of a self-employed manager who would have a vehicle without a contractual or identifiable consideration between the manager and the company, a situation in which the benefit in kind is then evaluated only for income tax purposes, without giving rise to identifiable compensation.

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We shot a video on this topic (in French):