French authorities ruling about VAT on company cars

At a glance

Employers providing company cars to French resident employees and have not yet regularized their VAT position in France must act now.

A closer look

On 30 April 2025, the French VAT authorities have published, in their official journal, their position regarding the decision of the Court of Justice of the European Union in the “QM” case (C-288/19, 20 January 2021) (https://bofip.impots.gouv.fr/bofip/14346-PGP.html/ACTU-2024-00164).  After reminding the content of the case, the French VAT authorities confirm that the French VAT is due on the private use of company cars put at disposal of employees when the employee trades  part of his remuneration (gross or net) or renounces to another advantage to use such car; or, in other words, when the employee has the choice to receive or decline the company car.

The taxable basis for VAT  is any payment made or to be made by the employee to the employer in exchange for the use of the car. Unlike Belgium which accepts a lump sum reduction of 35% of the taxable basis to consider the professional use (and thus taxing only 65%), the French VAT authorities do not accept any allowance for the professional use of the car.  Indeed, they consider that the employer determines the amount to be paid by the employee taking into account the private use, and thus excluding the professional use.

Foreign employers providing company cars to their French resident employees against remuneration, are liable to pay the French VAT to the French VAT authorities.  They need to file VAT returns in principle, but can opt to use the OSS, i.e.,  “one stop shop” (“guichet unique”), made available by their national authority.

The decision is silent about its date of entry in force.  We thus understand that the standard rules apply.  This means the VAT would be due for 2025, adding  a three years retroactivity period, i.e. since 1^st January 2022. This also means that the OSS could not be used to regularize past VAT amounts.

The decision also confirms  that where a car is put at the disposal of the employee for free, i.e., the employee does not pay for it nor sacrifices another advantage, its use remains taxable in the country of the employer.

As a conclusion, Luxembourg employers who have not yet regularized the VAT due on the private use of company cars by French resident employees against remuneration, must consider carefully this decision and act timely.

The Deloitte Luxembourg Indirect Tax Team remains at your disposal to discuss the potential impacts on your organization.