The French government has announced significant changes to the taxation of company cars, commonly known as "véhicules de fonction." This legislation, set to take effect on February 1, 2025, aims to encourage cleaner commuting practices by increasing the tax burden on thermal vehicles and providing incentives for electric vehicles. The changes are expected to affect millions of employees who benefit from these vehicles as part of their compensation packages.
Approximately 2.1 million company cars are currently registered in France, with 1.2 million classified as function vehicles. These cars can be used for personal purposes, making them valuable perks for employees. But as revealed by Yoann Magaut from Mobileo Consulting, the new tax calculation methods will inflate the gross annual salaries of employees using these vehicles, thereby increasing social contributions. "Une hausse des bases de calcul vient gonfler le salaire brut annuel et donc les charges sociales du salarié," Magaut stated.
The changes will see leasing tax rates increase from 30% to 50% and, for those employers covering fuel costs, potentially up to 67%. For purchased vehicles, tax on the cost will rise from 9% to 15%. To put this shift in perspective, using the example of a Peugeot 3008, the monthly cost for employees could leap from €159 to €266—a net increase of €107.
Despite these increases, Magaut explains, "Pour les collaborateurs même si la base de calcul augmente cela reste très avantageux par rapport à l'achat d'un véhicule individuel." He emphasizes the continuing attractiveness of function vehicles, even with rising costs. Yet for companies, this reform poses challenges. Added to the annual tax imposed for acquiring light vehicles, they now face increased costs associated with these changes. According to analysts, "Les entreprises devront adapter rapidement leur stratégie pour limiter l'augmentation des coûts," he added.
There is, though, some good news for businesses opting for electric vehicles. The government plans to provide substantial reductions for those who align with its eco-friendly agenda. While thermal vehicles will bear increased tax burdens, electric cars will see their tax abatement rise from 50% to 70%—if they meet specified environmental criteria. This is part of the government’s effort to transition corporate fleets toward greener alternatives, as only 15-16% of current registrations are electric.
Critics of the newly announced tax changes caution against the retroactive aspect of the reforms, which will only affect new function vehicles acquired since February 1, 2025. Mobilians, the federation representing automotive services, laments the lack of consultation before implementing such influential measures. They argue, "Ce nouveau texte, plus technique et plus restrictif que le précédent, pose des difficultés d'interprétation et d'application," which translates to concerns about clarity and implementation for businesses facing changes.
While the government’s intention to green the corporate car fleet is commendable, there are apprehensions about the possible financial burdens on employees. Notably, those already holding function vehicles won’t be affected by these new regulations, but the impacts on new holders may lead to increased costs and potential shifts away from traditional gasoline-powered vehicles.
Experts also highlight the challenges for companies managing their fleets as they adjust to tax structures. Mobilians urges legislative amendments to offer clarity and time for businesses to adapt adequately to the changes without facing immediate punitive financial consequences.
To summarize, the French government’s tax changes on company cars reflect broader environmental goals aimed at reducing carbon emissions through increased taxation on thermal vehicles, indirectly persuading businesses and employees to choose electric alternatives. How effectively this will reshape the corporate automotive sector remains to be seen. Will businesses embrace the transition swiftly enough to align with governmental targets? Time will tell.