France: Administrative clarifications on the VAT Treatment of vehicles provided to employees

published on 28 October 2025 | reading time approx. 3 minutes

In response to a ruling published on 30 April 2025, the French tax authorities clarified the VAT rules applicable when a company decides to make vehicles available to its employees for both business and private use (BOI-RES-TVA-000161, April 30, 2025).

In principle, VAT applies to the supply of goods and services for consideration by a taxable person acting as such.^[1]

Thus, when an employer provides an employee with a vehicle purchased or leased by the enterprise, this service is considered to be provided for consideration if there is a stipulated consideration.^[2]

Consequently, the employee's consideration is subject to VAT, while the company may, in principle, exercise its right to deduct the tax supported on the purchase of the vehicle intended to be made available to the employee on a permanent basis.

In its response to the ruling, the administration clarifies what is meant by consideration for the provision of a vehicle to an employee for both business and private use through the following examples:

The employee pays a contractually determined amount in order to benefit from a vehicle;
The company deducts an amount from the employee's gross or net salary in exchange for providing a vehicle;
The employee benefits from a vehicle through the use of a card with points convertible into additional salary. In this system, the employee has a points balance that allows them to choose a vehicle model. When the employee exceeds their points balance, the excess is deducted from their salary, while if they remain below their points balance, they can convert the balance into additional remuneration;
The employee waives additional remuneration in exchange for the provision of a vehicle.

In this context, when the provision of a vehicle to an employee is subject to a contractually defined consideration, the VAT regime applicable to the provision of a vehicle for the employee's business and private use can be summarised in the following table:

Territoriality

The provision of a vehicle is considered to be a long-term hire of a means of transport to a non-taxable person, provided that it exceeds 30 days, and is therefore taxable in the employee's State of residence.^[3]

Taxable basis

The taxable basis for VAT consists of the sums constituting the consideration for the provision of the vehicle. No allowance shall be applied based on the actual period of use.^[4]

Payment

When both the employee and the employer reside in France and the first provides the second with a vehicle in exchange for a stipulated consideration, the VAT due in France is declared and paid under normal conditions.^[5]

However, when the employee resides in France and the employer is located abroad, the VAT due may, optionally, be collected through the 'OSS-EU' one-stop shop.^[6]

Deduction right

Where the vehicle is intended, upon its acquisition by the company, to be made permanently available, in return for payment, to one of its employees, the VAT charged on this acquisition is not excluded from the right to deduction.^[7]

It should be noted that if the company has failed to include deductible VAT on its return, it may nevertheless correct its error before 31 December of the second year following the year of the omission.^[8]

However, when the vehicle is made available without consideration, the transaction is not subject to VAT, except where the provision of the vehicle constitutes a self-supply of services, provided that the VAT charged on the purchase of the vehicle has been deducted (even partially).^[9]

In conclusion, these recent administrative clarifications call on companies to review their operations for providing vehicles to their employees in order to claim any past VAT deduction rights and to strategically reassess their policy in this respect.

[1] Article 256, I of the French Tax Code (hereafter, “FTC").

[2] European Court of Justice, 20 January 2021, QM vs. Finanzamt Saarbrücken, para. 56.

[3] Article 259 A, 1, b of the FTC.

[4] Article 266 of the FTC.

[5] Article 287 of the FTC.

[6] Article 298 sexdecies G of the FTC.

[7] Article 271 of the FTC; Article 206, IV, 2, 6°, b of the Appendix II of the FTC.

[8] Article 208, I of the Appendix II of the FTC.

[9] Article 257, II, 2 of the FTC.