These allocation taxes replace the TVS from January 1st 2022, for an effective declaration in 2023.
These taxes concerning the allocation of vehicles for economic purposes include:
- the annual tax on carbon dioxide emissions;
- the annual tax on the age of passenger vehicles.
So, we will see below:
- who are liable for these taxes;
- the tariffs and the method of calculation;
- their tax deductibility.
I – Tax payables
These are the following people:
- vehicle owner;
- when the vehicle is the subject of a long-term rental, the lessee (who does not re-lease it to a third party);
- the person having the vehicle under any other rental formula (rental or provision);
- the company taking charge, totally or partially, of the costs incurred for the acquisition or use of the vehicle.
Individual entrepreneurs fall within the scope of these taxes, however an exemption measure is provided: vehicles used for economic purposes by a natural person are exempt from taxes, subject to compliance with the European “de minimis” framework.
Passenger cars classified as category “M1” within the meaning of European regulations. They are divided into different body types: sedan, car with hatchback, station wagon, coupe, convertible and multipurpose vehicle. In the latter case, these are motor vehicles other than those mentioned above and intended for the transport of passengers and their luggage or their property, in a single compartment.
Note: Passenger cars transformed into commercial vehicles, known as “dérivés VP”, having only one row of seats in the front and intended for the transport of goods should remain outside the scope of the taxes, as in terms of TVS.
Vehicles classified in category N1: these are motor vehicles designed and built primarily for the transport of goods with a maximum mass not exceeding 3.5 tons.
To be subject to taxes, these vehicles must be used in France for economic purposes. Thus, they must be authorized to circulate under one of the following conditions:
- they are owned by a company and registered in France;
- they travel on roads open to public traffic in the national territory and a company bears, totally or partially, the costs incurred by a natural person for their acquisition or use;
- in other cases than above, they travel on roads open to public traffic in the national territory for the purposes of carrying out an economic activity.
The exemptions are linked either to the destination of the vehicles or to their source of energy.
The vehicles exempted due to their destination are the following:
- wheelchair accessible vehicles;
- cars assigned exclusively to rental: this concerns companies whose object is the rental of vehicles. The condition of exclusive allocation is assessed according to the criterion of use of the cars and is strictly applied;
- vehicles taken on short-term rentals. They benefit from a tax exemption if the rental period does not exceed one calendar month or 30 consecutive days;
- vehicles used by associations: they are exempt from taxes when they are used for the purposes of VAT exempt operations of non-profit organizations whose management is disinterested. The same applies to organizations pursuing objectives of a union, religious or political nature relating to the collective defense of their members;
- courtesy cars: these vehicles are exempt when they are exclusively assigned by the taxpayer to the temporary provision of its customers to replace their immobilized vehicle;
- cars intended for the transport of people are exempt. This applies to passenger cars or taxis, luxury passenger cars operated under the name of “1st class passenger cars” and cars owned by motor transport companies and travel or tourist agencies and used for transportation of their customers;
- cars exclusively assigned to the activity of driving school or competition;
- vehicles intended for agricultural and forestry use;
- pick-ups exclusively assigned to the operation of ski lifts and ski areas.
The vehicles exempted due to their source of energy are the following:
- “clean” vehicles: vehicles whose energy source is exclusively electricity, hydrogen or a combination of the two are exempt from vehicle taxes;
- Hybrid vehicles: when they meet certain characteristics, they can benefit from an exemption from the only tax on CO2 emissions (the tax on seniority remaining due).
II – Tax rates and method of calculation
Tariffs of the annual tax on CO2 emissions
Vehicles under the old registration procedure (NEDC)
The applicable rates are:
- either a function of CO2 emissions/km for vehicles which have undergone Community type-approval, the first entry into service of which took place on or after June 1st 2004 and which were not used for economic purposes before January 1st 2006;
- either a function of the fiscal power of the vehicle for vehicles other than those which apply the tariff according to CO2 emissions.
To know these rates you can consult CIBS art. L. 421-121 et L. 421-122 where you can access by this link, or by contacting us directly.
Vehicles subject to the new registration procedure (WLTP)
The rate of the tax is equal to the amount determined according to CO2 emissions, expressed in grams per kilometer (g/km), under the following conditions:
- when emissions are less than 21 g/km, the tax rate is zero;
- when emissions are greater than or equal to 21 g/km and less than or equal to 269 g/km, the rate is determined by applying a scale presented in CIBS art. L. 421-120 website here (or you can of course also contact us);
- when emissions are greater than 269 g/km, the rate is equal to the product between CO2 emissions and €29 per g/km.
Tariff on the age of the vehicles
The annual rate depends on the year of first registration and is established according to the type of fuel according to the scale presented to the CIBS art. L. 421-134 whose access link to the website is indicated above.
Vehicles whose costs are borne by companies
Concerning vehicles owned by natural persons (employees or managers) and used for economic purposes in the territory of taxation by a company, the amount of the tax is corrected as follows:
- application of a weighting coefficient depending on the distance travelled by the vehicle for business trips (CIBS art. L. 421-110).
Annual distance travelled (km)
Percentage of tax payable
From 0 to 15,000
From 15,001 to 25,000
From 25,001 to 35,000
From 35,001 to 45,000
- application of a €15,000 reduction subject to compliance with the conditions provided, as the case may be, by the general “de minimis” European regulation, the “de minimis” regulation in the agricultural sector or the “de minimis” regulation in the fishing or aquaculture sector.
The tax is determined on the basis of a proportion of annual use, equal to the quotient between the duration of the assignment of the vehicle in France for economic purposes (in days) / the number of days of year.
However, until December 31st 2024, the taxpayer can opt for a flat-rate calculation of taxes (on CO2 emissions and on seniority) on a quarterly basis. This temporary option is formulated at the latest at the time of the declaration and applies to all vehicles.
The tax period runs from January 1st to December 31st of each year.
How to report taxes depends on the company’s VAT status
- for persons liable for VAT subject to the normal real tax regime, the taxes must be declared and paid electronically on the annex to the VAT declaration filed during the month of January (form 3310 A, lines 117 and 118);
- for VAT taxpayers subject to the simplified VAT declaration regime, the taxes relating to the year must be declared on form 3517 (CA12-CA12E), which must be filed for the financial year during from which the tax became payable;
- for persons not liable for VAT, these taxes are declared and liquidated on the same appendix as persons subject to the normal real VAT regime (form 3310 A) and transmitted electronically to the collection department responsible for the main establishment, during the month of January, according to the VAT deadline calendar.
No declaration is required when the amount of tax due is zero.
Summary annual statement
All companies are required to draw up an annual summary statement of the vehicles they use and which fall within the scope of these taxes. This summary statement must:
- show, for each vehicle, the technical parameters involved in setting the tariff, the date of first registration and the date of first entry into circulation in France, the conditions of assignment as well as the periods of assignment. Exempt vehicles are presented separately by reason for exemption;
- be made available to the administration and communicated on first request.
To this end, the administration provides taxpayers with models of calculation aid sheets, which can be used as a summary annual statement (forms 2857-FC-SD for the tax on carbon dioxide emissions and 2858- FC for the seniority tax).
III – Tax deductibility of these two taxes
When it is due by a company subject to corporation tax (IS), vehicle allocation taxes are not deductible. On the other hand, when they are due by an entity not liable to corporate tax, these taxes are deductible, in the absence of a provision prohibiting the deduction.
Whether taxes are deductible or not is assessed on the first day of each tax period, i.e. January 1st of each year.
Consequently, an entity liable to corporate tax on the first day of the tax period cannot deduct them, even if it placed itself, before the expiry of the current tax period, under the regime of the income tax.
Correlatively, a company subject to income tax on the first day of the tax period and which, before the expiry date of this period, becomes a capital company or opts for income tax, may deduct the taxes due from amount of its corporate profit immediately taxable in the name of its partners on the date of the conversion or option.
All the team of French Business Advice is at your disposal to help you to understand better our French system, so do not hesitate to contact us!
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