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The French automotive sector has been engaged in an accelerated transition towards electrification for several years. At the heart of national carbon reduction ambitions, this transition has resulted in a proliferation of incentives promoting more sustainable mobility.

In this context, at the beginning of 2025, the government changed the tax framework applicable to company cars provided by businesses, which has a direct impact on businesses and their employees.

Company car and service car : An essential distinction

Before addressing the tax aspects, it is important to distinguish between two concepts that are often confused :

• The service car is reserved for strictly professional use and may not be used for personal purposes.
• A company car, on the other hand, may be used for personal purposes in addition to its professional use. As such, it constitutes a benefit in kind..

Today, there are approximately 1.2 million company cars on the road in France, making this benefit an important lever for attracting and retaining employees for companies.

In practical terms, the benefit in kind associated with the provision of a company car must be included in the payslip and added to the employee's gross salary. This benefit therefore increases the basis for employee contributions and the employee's taxable income.

Taxation of company cars before 2025

The employer is required to assess the value of the benefit in kind represented by the company car provided.
There are two possible methods for doing this :

• Actual valuation, based on the actual cost of the vehicle and its expenses ;
• Flat-rate assessment, applying a flat rate governed by law.

In reality, the majority of employers favour flat-rate assessment. However, it is precisely this method that has undergone profound changes in 2025.

Until the end of January 2025, the scale was as follows :

• For hire vehicles :
  
  • 30% of the annual rental cost if the employer did not cover the fuel costs ;
  • 40% when fuel was covered.

• For a purchased vehicle : between 6% and 9% of the purchase price of the vehicle, depending on its age.

Tax changes since 2025

Since the decree of 25 February 2025, the scale used for flat-rate assessments has been revised upwards for combustion engine vehicles.

For all company vehicles made available on or after 1 February 2025, the scale is as follows :

	Fuel not covered by the employer	Fuel costs covered by the employer
Vehicle purchased less than 5 years ago	15 % of the purchase price including VAT	20 % of the purchase price including VAT
Vehicle purchased more than 5 years ago	10 % of the purchase price including VAT	15 % of the purchase price including VAT
Hire car	50 % of the total annual cost	67 % of the total annual cost

These new rules result in a significant increase in the declared benefit in kind, with direct consequences on social security contributions and income tax for the employees concerned.

Electric vehicles: An increasingly attractive tax framework

While taxation on combustion engine vehicles is becoming stricter, the decree of 25 February 2025 introduces, conversely, a reinforced scheme in favour of 100% electric company cars.
Before 2025, beneficiaries of an electric vehicle enjoyed a 50% reduction on the benefit in kind, up to a limit of €2,000 per year.

Since 1 February 2025, this allowance has been increased to 70%, up to a limit of €4,582, for vehicles made available from that date onwards and with a favourable eco-score issued by ADEME.
This strengthening of the tax system confirms the government's desire to accelerate the greening of corporate vehicle fleets.

Concrete example of impact for an employee

Let us take the example of an employee earning a gross monthly salary of €2,700, who has a company car purchased for €35,000, less than 5 years old, with no fuel allowance.

	Combustion engine vehicle			Electric vehicle
	Before 2025	After 2025	Difference	Before 2025	After 2025	Difference
Gross salary	32 400 €			32 400 €
Annual company car allowance	3 150 €	5 250 €	+ 2 100 €	1 575 €	945 €	- 630 €
Annual employee contributions*	7 824 €	8 292 €	+ 468 €	7 475 €	7 336 €	- 139 €
Annual income tax*	1 415 €	1 660 €	+ 245 €	1 232 €	1 158 €	- 74 €

                                                               *Indicative amounts may vary depending on the employee's situation.

In our example :

• For an employee equipped with a combustion engine company car, the additional cost associated with this new tax framework is €713 per year, or approximately €60 per month.
• Employees equipped with an electric company car will save €213 per year.
• When the net monthly salary after tax for an employee with an electric vehicle would be €1,992, with a combustion engine car it would be €1,870, a difference of €122.

This development poses a real challenge for employees and companies, who must now incorporate the management of their vehicle fleets into their HR strategy.

Greening fleets : a strategic challenge for businesses

This is therefore a new incentive scheme to promote the greening of the French vehicle fleet. These measures are in addition to the obligation introduced by the LOM Act, which requires companies with a fleet of more than 100 vehicles to gradually replace part of their fleet with 100% electric vehicles. Find all the obligations for companies in our regulatory guide.

In this context, greening corporate vehicle fleets is no longer just an environmental commitment; it is becoming a lever in financial, regulatory and HR terms.

It is therefore in companies' best interests to anticipate these developments and start planning for the transition to electric vehicles today by equipping themselves with charging solutions tailored to fleet management: charging points, collective stations and dedicated accessories.
The transition to electric mobility has never been so central to achieving carbon neutrality targets in France. Businesses will be key players in this transition.