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The French VAT authorities issued on 30^th April 2025 a tax ruling that clarifies the French implications related to VAT and company cars. This tax ruling follows and transpose the conclusions of the “QMâ€� case law (C-288/19), ruled by the Court of Justice of the European Union (“CJEUâ€�) in January 2021. 

As a reminder, on 20th January 2021, the CJEU issued a ruling on VAT application for company cars put by employers at the disposal of their employees (we refer to our previous tax alert 2023-12).

In a nutshell, the CJEU ruled that the supply should be considered as made against consideration as “supply of long-term hiring of a means of transport� when:

• the employee has the right to use the car for private purposes, for an agreed period of more than 30 days;
• the employee has the right to use the car against the payment of a rent;
• the car remains permanently at his disposal including for private purposes.

Consequently, such supply should be subject to VAT at the place of residence of the employee. The employer should therefore be able to collect and remit the VAT in all the countries where its employees reside.

Following this ruling, VAT authorities in Germany, Luxembourg, and Belgium defined the scope of application of VAT to the supply of company cars while French VAT authorities remained silent until now.

The French VAT authorities answered a tax ruling request on 30^th April 2025 in the French Official Bulletin of Public Finances (BOI-RES-TVA-000161). This ruling aimed to clarify the French VAT authorities position on “the VAT consequences of a company's decision to make vehicles available to its employees for both business and private use�.

The French VAT authorities concluded in this tax ruling that the provision of a company car for consideration by an employer to its employee should qualify as a long-term rental of a means of transport provided to a non-taxable person, falling within the scope of the “QM� CJEU case law.

Key aspects of the ruling include:

• Territoriality: The supply of a company car is taxable in the employee's country of residence if the employee pays a consideration for it (i.e., performs a payment or gives up a part of his cash remuneration).
• Taxable Basis: The taxable basis should be constituted (according to the provisions of the agreement in place) by the amount of the rent or by the fraction of the salary to which the employee has renounced, without any deduction based on actual period of use.
• VAT compliance obligations: The VAT is due by the foreign employer (i.e. Luxembourg employer) for a French resident employee, either through local registration in France or optionally via the One Stop Shop (“OSSâ€�).
• Input VAT recovery right on vehicle purchase: When the vehicle is intended for permanent use by an employee for consideration from the moment of its acquisition by the employer, the VAT charged on this acquisition should be deductible without applying any deduction according to the duration of private use. Additional rules apply if the vehicle is assigned to an employee leasing activity after its acquisition.

While these guidelines were foreseen and align broadly with current market practices, we encourage you to consult our French VAT colleagues� article (available in French) for further insights. We strongly recommend reviewing your company's car policy to ensure proper VAT treatment, confirm potential input VAT recovery rights, and ensure compliance with French regulations.

Your team of VAT experts remains at your disposal for any questions you may have regarding the above.