New VAT Guidelines on Company Vehicles for Employees

The French tax authorities have issued new guidelines on the VAT treatment of company cars provided to employees. When a vehicle is provided for a defined consideration, it is considered a taxable service. This includes situations where the employee's salary is deducted or where the employee renounces part of their remuneration in exchange for the car. The VAT regime varies based on territoriality, tax base, and payment models. If the company and employees are in different EU Member States, the service is taxable in the employee's country of residence. The taxable basis includes all amounts received as consideration, such as salary deductions. VAT on the acquisition of company cars used by employees in exchange for consideration is deductible. If no consideration is specified in exchange of the use of the car, the transaction is not taxable, unless VAT was recovered on the vehicle's acquisition. Special rules apply for company shuttles used for employee's transportation, particularly in challenging locations, where the transport is considered part of the company's normal operations. VAT on such vehicles is recoverable.

Key takeaway

Companies should review their company car policies to ensure compliance with the new VAT guidelines and optimise VAT recovery.

Reference

• RES - Taxe sur la valeur ajoutée - Champ d’application et territorialité - Régime de TVA applicable à la mise à disposition par une entreprise de véhicules à ses employés

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