Recovery of VAT on company vehicles: a decisive tax reform for businesses

From April 30, 2025, a major tax reform will come into effect in France. Thanks to the ruling BOI-RES-TVA-000161 published on April 30, 2025, companies will now be able to recover VAT on company vehicles, even when they are used privately by employees. This change paves the way for a new form of tax optimization, while imposing specific implementation conditions.

What the tax ruling of April 30, 2025, provides

Historically, VAT on passenger vehicles made available to employees was not recoverable if they could use it for personal purposes. The BOI-RES-TVA-000161 overturns this rule.

From now on, if the employee pays an identifiable consideration for the private use of the vehicle, it is considered a paid service. This reclassification allows for the recovery of VAT on:

The purchase of the vehicle;
Its rental;
Its maintenance.

Conditions to benefit from VAT recovery

This tax advancement only applies if certain conditions are strictly met.

An identifiable financial consideration from the employee

The company must receive a consideration from the employee for the tax authorities to consider it a taxable operation. This consideration can take several forms:

Direct payment (bank transfer or check);

Salary deduction;

Reduction of a benefit in kind equivalent.

In the absence of this formalized contribution, no right to recover VAT will be recognized.

Issuance of an invoice subject to VAT

The company must issue an invoice including VAT, collect this tax, and then include it in its declarations. The operation is therefore considered commercial, with all the obligations that this entails in terms of accounting and taxation.

A strategic issue for businesses

This reform represents a significant economic opportunity, particularly for companies with fleets of company vehicles.

Reduction of the overall cost of vehicles

The possibility of generating VAT recovery on expenses related to these vehicles allows for:

Reducing the total cost of ownership (TCO);

Making rental options more attractive;
Optimizing compensation packages that include a vehicle.

Even with this reform, providing a vehicle remains a benefit in kind, which implies:

URSSAF contributions to be anticipated;

Payment of the TVS (Tax on Company Vehicles);

The impact on the calculation base of the CFE (Business Property Contribution).

A comprehensive analysis is therefore necessary to avoid pitfalls.

A possibility of retroactive regularization

Good news: if an identifiable consideration already exists for non-prescribed periods, companies can initiate a regularization process.

Steps to follow

Filing VAT claims for the relevant periods;

Gathering supporting documents (contracts, pay slips, invoices);

Updating contractual and accounting documents.

A tax audit can be very useful to secure all the steps.

Prepare for May 6, 2025

With effective implementation on May 6, 2025, according to the administrative calendar, companies have little time to prepare effectively for this change.

Compliance steps

1. Identify the affected company vehicles;

2. Check or establish a financial consideration from the employee;

3. Revise employment contracts and pay slips;

4. Set up invoicing with collected VAT;

5. Evaluate the fiscal and social repercussions.

Coordination between your HR, legal, tax, and accounting departments is essential.

Anticipate to generate a secure tax advantage

This tax reform now aligns France with European jurisprudence while allowing companies to generate significant tax savings through VAT recovery on company vehicles.

However, this advantage requires rigorous, transparent, and well-documented implementation. Companies must act quickly not to miss this opportunity.

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✅ PRAX Avocats supports you

Our firm offers comprehensive expertise to:

Assess your rights to VAT recovery;

Update your contractual documents;

Secure regularization processes through a tailored tax audit.

🗓 Don’t wait: the reform comes into effect on May 6, 2025.

📞 Contact PRAX Avocats today to secure your tax processes.