Taxation: definitions
The taxation is often a complex subject. Laws change with each government, and keeping up to date is complicated.
Taxation is the set of rules put in place by the State or local authorities to collect taxes and other compulsory levies.
In a nutshell, taxation is a framework put in place by the State to collect recurring income to finance the needs of the country in which you work and live.
However, since taxation is a set of rules, if you can master them, you can turn them to your advantage. This is particularly true for company vehicles.
Let's take a look at the tax rules that will be of interest to you if you have one or more vehicles for your company and want to understand what's at stake, and how you can optimize your situation.
Electric vehicle taxation: 2023
The major difference in the taxation of electric vehicles is the reduction in the ecological bonus for companies in 2022. Indeed, the ecological bonus is €3,000 for professionals in 2023 .
Other changes in 2023:
- the depreciation base for electric and hybrid vehicles will remain unchanged in 2023.
- the WLTP standard has evolved to 2023. This standard measures the CO2 emissions of each vehicle more precisely, and will therefore increase the CO2 emission values of internal combustion vehicles.
- the ecological penalty will increase: since the calculation of the ecological penalty is based on CO2 emissions, which will increase with the new WLTP standard, prices will soar in 2023.
- the amount of the tax on the use of combustion-powered passenger vehicles for economic purposes will also be affected by the new 2023 eco-malus scale.
The good news is that while the ecological bonus was due to expire in December 2022, it has been extended to 2023.
Comparative table of the 2023 vs. 2024 ecological bonus
| Ceiling 2023 | Ceiling 2024 | |
|---|---|---|
| New electric or hydrogen car (1) - RFR> €15,400(5) | 5 000 € | 4 000 € |
| New electric or hydrogen car (1) - RFR≤ €15,400(5) | 7 000 € | 7 000 € |
| New electric or hydrogen car (1) - legal entity | 3 000 € | - |
| Used electric or hydrogen cars | 1 000 € | - |
| New electric or hydrogen-powered light commercial vehicle (2) -RFR > €15,400(5) | 6 000 € | 5 000 € |
| New electric or hydrogen-powered light commercial vehicle (2) -RFR ≤ €15,400(5) | 8 000 € | 8 000 € |
| New electric or hydrogen-powered light commercial vehicle (2) - legal entity | 4 000 € | 3 000 € |
| Used electric or hydrogen-powered light commercial vehicles | 1 000 € | - |
| New 2- or 3-wheel vehicle or electric quadricycle (3) ≤ 3 kW | 100€ | 100€ |
| New 2- or 3-wheel vehicle or electric quadricycle (4) ≥ 3 kW | 900€ | 900€ |
Vehicle taxation: Commercial vehicle or passenger car? How to choose?
When it comes to vehicle taxation, you need to distinguish between two types of vehicle for your company, which will have a major impact on the taxation of your fleet.
- The commercial vehicle (CV): vehicle designed to transport goods, not people.
The commercial vehicle must therefore meet a set of specifications to obtain LCV status in field J1 of the vehicle registration document.
- Must have a maximum of two front seats.
- Do not have a rear bench seat or anchor points that allow the rear seats to be used.
- Passenger car (PC) A vehicle designed to carry people and not exclusively goods.
The passenger vehicle, whose acronym is VP (véhicule particulier) on the J1 field of the vehicle registration document, can carry up to 9 people including the driver.
Lease an electric car
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Depreciating your vehicle: the rules in force
A company can depreciate a number of assets. Most people are familiar with the principle ofdepreciation for computers, but not so much for vehicles. If you buy a new vehicle in 2023, here are the tax rules that apply.
According to the new Senate amendment, "The aim is to provide companies with a tax incentive to acquire low- and very low-emission vehicles, in order to speed up the greening of the French vehicle fleet. We more than 50% of new vehicles put on the road belong to companies or public administrations. Of these vehicles, 79% are diesel-powered and only 4% are electric or hybrid."
Your vehicle will lose value over time as you use it.
Depreciation takes into account the depreciation of your vehicle over time: it can then be considered as an expense for your company.
This charge is the loss in value of an asset over time (the asset being your vehicle).
To understand :
Profit = Sales - Expenses
In simple terms, depreciation is an expense, so it will reduce your profit and therefore lower your corporation tax.
The depreciation rules for vehicles are different, whether you have a commercial vehicle or a passenger car.
- The simplest case : the commercial vehicle. The depreciation base is 100% over a period of 4 to 5 years.
Example I bought a new commercial vehicle for €20,000 in January 2023. The depreciation period is 4 years.
Annual depreciation will be €20,000/4 = €5,000. In my income statement, the charge to my company will therefore be €5,000.
- The most complex case yet, passenger cars. They are governed by the tax rules put in place by the State. France's objective is to make the French car fleet ever cleaner, by means of a tax policy that is more or less advantageous depending on the vehicle.
With this in mind, the depreciation base depends on the year of acquisition of the vehicle and its CO2/km emission rate.
The depreciation base varies according to the vehicle's CO2 emissions, based on the following scale. In 2019, the scale was different.
| Ceiling | 2022 | 2023 |
|---|---|---|
|
30 000 € |
< 20 g de CO2 / km |
- |
|
20 300 € |
From 20 g to 50 g |
- |
|
18 300 € |
From 60 g to 135 g |
From 60 g to 130 g |
|
9 900 € |
> to 135 g |
> 130 g |
Is it possible to reclaim VAT on a company car?
Is it possible to reclaim VAT on a company car? What about electric cars? What are the conditions and exceptions?
The taxation of vehicles and electric vehicles has already been covered in our articles on the subject. We're now going to take a look at VAT on company cars.
A short history of VAT
VAT or Value Added Tax is a consumption tax invented in France in 1954. Before the introduction of VAT, companies were subject to taxes, which they passed on in their selling prices. Problem: the more intermediaries there were, the higher the price.
With VAT, regardless of the number of intermediaries involved, the end consumer pays the same tax, which is generally 20% of the product's price excluding VAT.
The buyer therefore pays VAT to the company from which he buys the product, and not to the State.
Each of the companies involved in the production of the purchased product will then pay this tax to the State.
Let's take a concrete example
You buy equipment for €24,000 including VAT. In this case, VAT is €4,000.
The seller will collect €4,000 in VAT (output VAT).
The seller then deducts the VAT charged by suppliers on the purchase of goods, known as deductible VAT, and pays the difference to the government.
However, the VAT concept is different for company cars.
Is it possible to reclaim VAT on a company electric car?
In theory, no. VAT is not recoverable on passenger cars for business use, regardless of the method of purchase(long-term leasing, leasing with purchase option or cash purchase).
If the employee buys the car on a personal basis for business use, and is therefore entitled to mileage allowancethey will have to pay VAT. The company cannot reclaim the VAT.
The exceptions
You can reclaim VAT if you purchase commercial or company vehicles, regardless of the method of purchase(long-term leasing, leasing with purchase option or cash purchase).
- commercial vehicles (CUVs) or light commercial vehicles (LCVs).
- industrial vehicles (VI).
- private vehicles (PS), but only if they are used for driving lessons or passenger transport (cab, VTC).
- passenger cars for rental.
- 2-seater derivatives of passenger cars (PCs), provided that the vehicle registration document specifies the name van (CTTE) or 02 for the number of seats.
VAT can be reclaimed if the car is resold to a used-vehicle dealer.
When you resell your vehicle, the sale of an asset that has not given rise to a right of deduction is exempt from VAT (article 261-3-1° of the French General Tax Code). The buyer of a company car will therefore not be able to deduct any VAT.
In the specific case of resale to a used vehicle dealerthe company can sometimes recover part of the VAT initially paid.
Note that a dealer can reclaim VAT if the car has always been owned by companies before.
Is it possible to reclaim VAT on fuel?
Yes, VAT is recoverable on fuel, but with different rates for different types of fuel.
| Fuel | Recoverable VAT |
|---|---|
|
Diesel |
80 % |
|
LPG (Liquefied Petroleum Gas: a mixture of butane and propane) |
100 % |
|
GNV |
100 % |
|
Electricity |
100 % |
In addition to VAT, companies also benefit from tax advantages for electric vehicles (EVs).
- No tax on the use of passenger cars for economic purposes.
- Exemption from vehicle registration fees.
- Depreciation base of €30,000.
Tax on the use of passenger vehicles for economic purposes
How much is the tax on the use of passenger cars for economic purposes for electric cars?
The taxe sur l'affectation des véhicules de tourisme à des fins économiques (tax on the use of passenger vehicles for economic purposes) is a tax on a company's private vehicles. How is it calculated? How much does it cost per year? What about electric cars? That's what we'll be looking at together in this article.
Tax on the use of passenger vehicles for economic purposes: definition
To put it simply, the tax on the use of tourist vehicles for economic purposes is a tax levied on companies that have their head office or an establishment in France. This tax concerns the passenger vehicles they use, own or lease.
What is a passenger vehicle?
The purpose of this vehicle is to transport people. It has a maximum of 9 seats, including the driver. It has a rear bench seat and can carry more than 2 people. It bears the designation VP on the J.1 section of your vehicle registration document.
The tax on the use of passenger cars for business purposes is payable annually to the local business tax office (Service des Impôts des Entreprises - SIE ).
It is calculated according to several criteria:
- the vehicle's CO2 emissions,
- the date of issue,
- vehicle fuel (diesel, petrol).
How is the tax on the use of passenger cars for economic purposes calculated?
The tax on the use of passenger vehicles for economic purposes is the sum of two components:
- 1ʳᵉ component: A tariff applied according to the CO2/km emission rate.
| CO2 emissions (g/km) | Rate per g/km |
|---|---|
|
Up to 20g/km |
0 € |
|
21 to 60g/km |
1 € |
|
61 to 100g/km |
2 € |
|
101 to 120 g/km |
4,50 € |
|
121 to 140 g/km |
6,50 € |
|
141 to 160 g/km |
13 € |
|
161 to 200 g/km |
19,50 € |
|
201 to 250 g/km |
23,50 € |
|
Over 250 g/km |
29 € |
- 2ᵉ component: A tariff applied according to air pollutant emissions.
The aim of this component is to tax the most polluting vehicles according to their fuel. Diesel pollutes more than petrol, so it is taxed more heavily.
| Circulation year | Petrol | Diesel | Electric |
|---|---|---|---|
|
2011 à 2014 |
45 € |
100 € |
0 € |
|
2015 to present |
20 € |
40 € |
0 € |
The tax on the use of passenger vehicles for economic purposes is the sum of the two components .
Example: I bought my new car in January 2019, emitting 138 g/km of CO2 and running on diesel.
Tax on the use of passenger vehicles for economic purposes = 1ʳᵉ component + 2ᵉ component
= (138 * 6,50) + 40
= €937/year
Which vehicles are covered by the tax on the use of passenger cars for economic purposes?
The tax on the use of passenger vehicles for economic purposes applies to certain types of vehicle:
- vehicles registered in the "VP" category.
- multi-purpose vehicles classified as category "N1" and intended for transporting passengers and their luggage or goods.
- vehicles with at least 5 seats, whose European body code is pick-up trucks.
(A seat is considered to exist if the vehicle is equipped with "accessible" anchorages, i.e. can be used).
Good to know: commercial vehicles such as vans and light trucks are not classified as passenger vehicles.
In short, if the vehicle :
- transporting goods, you do not pay the tax on the use of passenger vehicles for economic purposes.
- transports people, you are subject to the tax.
The tax on the use of passenger cars for economic purposes for electric cars
Electric vehicles are exempt from the tax on the use of passenger vehicles for economic purposes
.
This exemption only applies to vehicles emitting less than 20 g/km of CO2.
As mentioned above, the tax on the use of passenger cars for economic purposes is the sum of the two components. For electric cars, the calculation is therefore different.
Example: I bought my electric vehicle in January 2019 emitting 0 g/km of CO2 and running on electric power.
Tax on the use of passenger vehicles for economic purposes = 1ʳᵉ component + 2ᵉ component
= 0 + 0
= 0 €
What other vehicles are exempt from the tax on the use of passenger cars for business purposes?
In certain cases, you are exempt from the tax on the use of passenger vehicles for economic purposes:
- transport vehicles available to the public (cabs and VTCs, for example);
- vehicles intended exclusively for sale (e.g. car dealers' cars);
- vehicles accessible to the disabled When a vehicle is accessible to a disabled person, it comes under category M1, which means it is exempt from the tax on the use of passenger vehicles for economic purposes.
- vehicles using a combination of gasoline and natural gas, fuel or liquefied petroleum gas are permanently exempt (if CO2 emissions are less than or equal to 50 g/km) or temporarily exempt (if CO2 emissions are between 60 and 100 g/km) from the first component of the tax rate. from the first component of the tax rate.
- vehicles intended for rentalif the purpose of the company is vehicle rental;
- vehicles used exclusively for driving instruction driving instruction (driving schools) or sporting competitions (except for circuit racing companies, which are taxable);
- vehicles intended exclusively for agricultural use (passenger vehicles).
Electric vehicles are therefore exempt from this charge for companies. But this is not the only tax advantage of electric vehicles. To find out more, take a look at our file on the taxation of electric vehicles.
See also - TCO (Total cost of ownership): how to calculate and optimize it?
Bonus: battery depreciation for electric vehicles
Yes, you read that right, it is possible to depreciate the battery of your electric vehicle, which is considered to be part of your vehicle's equipment and can therefore be depreciated on the basis of an invoice sent by your dealer.
The depreciation basis for the battery isbetween €10,000 and €26,000, depending on the power of the battery, and can be carried out either over one year or over the period of ownership of the vehicle.
The battery can be depreciated, whatever its value, on condition that it appears either :
- on the vehicle purchase invoice, depreciation will be taken from the date of acquisition to the company's financial year-end, or over a period of 5 years or less.
Either,
- on a separate invoice, which has the advantage of not being subject to a ceiling on tax-deductible depreciation.
- 30,000 for the vehicle
- 12,000 € for the battery
- still €30,000 for the vehicle.
- 13,000 for the battery.
Taxation of internal combustion vehicles VS electric vehicles
| Diesel vehicle | Electric Vehicle | |
|---|---|---|
|
Base price |
33 000 € |
33 000 € |
|
CO2 |
138 g/km |
0 g/km |
|
Tax on the use of passenger vehicles for economic purposes |
937 €/year |
0 €/year |
|
Depreciation base |
9 900 € |
30 000 € |
|
Battery damping |
0 € |
+ 10 000 € |
Electric vehicle taxation will therefore be more advantageous in 2023.
In addition to fuel savings, you can take advantage of an attractive tax policy:
- Depreciation base maintained at €30,000 for electric vehicles.
- No tax on the use of passenger vehicles for economic purposes.
- Exemption from registration fees in most regions of France.
- Possibility of amortizing the battery of your electric vehicle, depending on the case.
In a nutshell
Before you choose your next company car, make sure you understand the tax implications. Over and above a good image and fuel savings, the electric car represents a real tax opportunity for you, now that you understand the rules of the game. Electric vehicle taxation is an opportunity for your company, and it would be wise to start looking into it.
See also - TCO (Total cost of ownership): how to calculate and optimize it?
