VAT eAlert

VAT on the supply of vehicles to employees: clarification from the French tax authorities

Deux femmes en discussion
  • 25/06/25

The supply of vehicles by a company to its employees for both professional and private use is now more clearly framed by the French tax authorities. The tax ruling dated 30 April 2025 clarifies the conditions under which such transactions are subject to VAT, in line with the “QM” judgment by the CJEU and certain domestic decisions (notably ACA Lyon, 30/03/2017, No. 15LY02973 and AC Nice, 17/01/2020, No. 1800423). These comments from the French administration are part of a broader movement already underway in recent years in several EU Member States such as Belgium, Luxembourg, and Germany.

A French position aligned with EU case law

Through an update of the BOFiP dated 30 April 2025 (BOI-RES-TVA-000161), the French tax authorities clarify the VAT treatment applicable to the supply of vehicles to employees.

These comments have been released following the “QM” judgment rendered by the Court of Justice of the European Union (CJEU) on 20 January 2021 (Case C-288/19), which confirmed that such supply may constitute a supply of services for consideration, where an identifiable consideration is provided in return.

Where consideration is paid by the employee: a supply of services for consideration subject to VAT

The ruling confirms that when an employee is granted use of a vehicle for private purposes in exchange for an explicit or implicit consideration (such as a deduction from gross or net salary, waiver of a benefit or part of remuneration, or a point-based system convertible into advantages), the transaction is subject to VAT. This classification applies regardless of the form of the consideration, provided that there is a direct link between the service provided and the remuneration received.

This entails the following VAT implications:

  • Place of supply: Where the employee is established in another EU Member State than that of the employer, the transaction qualifies as a long-term hiring of a means of transport and is deemed to take place in the employee’s Member State of residence, pursuant to Article 259 A of the French Tax Code (transposing Article 56 of Directive 2006/112/EC).
  • Taxable amount: The taxable basis should correspond to the actual consideration paid or to the value of the remuneration waived by the employee.
  • VAT reporting: In cross-border contexts, eligible foreign companies may use the One-Stop Shop (OSS) to report and remit VAT due in France.
  • Right to recover: Input VAT incurred on the acquisition or leasing of the vehicle is recoverable under standard conditions, without adjustment for the private use of the vehicle.

Where no consideration is paid by the employee: no supply of services for consideration, but VAT may still apply depending on vehicle allocation

Where the employee provides no identifiable consideration, the provision of the vehicle does not, in principle, constitute a supply of services for consideration subject to VAT.

However, if the company has deducted VAT on the purchase of the vehicle, the private use by the employee may be regarded as a self-supply subject to VAT under Article 257, II-2 of the French Tax Code.

Employee shuttles and shared vehicles

The ruling also addresses the case of shuttles organised by companies to transport employees between their homes and the workplace.

In principle, such services are considered to meet private needs and therefore do not give rise to a right to recover VAT.

Nevertheless, in accordance with EU case law (CJEU, 16 October 1997, Case C-258/95, Fillibeck), an exception may apply where the use of the vehicle meets the specific needs of the company’s business operations (e.g. isolated or multi-site locations). In such cases, the provision of the vehicle may be justified by business needs and, subject in particular to the vehicle having more than eight seats, the VAT incurred on the related expenses may be recovered.

Key takeaways

These clarifications from the French tax authorities, now aligned with EU case law, require companies to:

  • Review their vehicle provision schemes for employees, identifying cases where consideration (e.g. deductions, waivers, etc.) is or is not involved;
  • Assess the financial impact of VAT taxation on the benefit granted to employees and the overall cost borne by the company (given that input VAT on vehicle acquisition or lease may be deductible);
  • Update their contracts, internal policies and VAT compliance processes, particularly in the case of cross-border transactions within the EU;
  • For other types of vehicles (e.g. shuttles): verify the actual use and allocation of the vehicles for collective employee transport.

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José Manuel Moreno

José Manuel Moreno

Avocat, Associé TVA & Indirect Tax, PwC Société d'Avocats

Tiphanie  Stoss

Tiphanie Stoss

Avocat, Directeur, TVA & Indirect Tax, PwC Société d'Avocats

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