Technical Update - (Revised May 2017 - Benefits in kind (avantages en nature)
of company cars in France

Introduction

If an employer provides an employee with a company car, the private usage of such a vehicle by the employee, outside of working hours, constitutes a benefit in kind or avantage en nature. The use of a company car to travel from home to the workplace is not considered to be part of the benefit in kind, as long as the employer is able to demonstrate that:

• the use of the vehicle is necessary for the work;
• the employee is unable to use public transport to get to work (either because of poor transport connections between their home and workplace or because of the hours or conditions of the work).

Benefits in kind are taxable in France in the same way as an employee’s salary. This is achieved by adding the benefit in kind to the gross salary on an employee’s payslip. Social security deductions are calculated on this total amount. The benefit in kind is then removed once the deductions have been made from the overall amount, giving the net salary to be paid to the employee. It should be noted however, that this net salary paid to the employee is not net in the English sense of the word, as income tax has not yet been deducted from it. In France income tax is not paid through the PAYE system as in England.  Instead employees must declare their income at the end of the financial year (in France this is the same as the calendar year). The income tax is then calculated and paid in the following tax year.

Definitions of different types of company car available in France

Company car (véhicule de fonction): vehicle provided to an employee by an employer authorised for use during and outside of working hours.

Service vehicle (véhicule de service) : vehicle provided by a company to an employee exclusively for professional use during working hours only.

Commercial vehicle (véhicule utilitaire) : vehicle used specifically for the transportation of goods e.g. forklift, lorries etc.

Of the above, only a véhicule de fonction gives rise to a benefit in kind since a véhicule de service is only used for professional purposes during working hours and a véhicule utilitaire does not constitute a benefit in kind provided that it is stated in the company's rules and regulations that such a vehicle is for professional use only.

Calculating the benefit in kind for a company car (véhicule de fonction)

The benefit in kind associated with a company car can be calculated using one of two methods at the choice of the employer:

1. actual annual expenses (dépenses réelles) to include:

• the annual depreciation charge of the cost of the vehicle inclusive of VAT;
• annual petrol costs (corresponding to private usage only, not including home to work journey);
• annual insurance costs;
• annual maintenance costs.

2. an annual flat rate amount (forfait annuel) calculated as a fixed percentage of the purchase cost of the vehicle including VAT. If the employer pays for petrol, either the actual petrol cost used for private journeys is added to the flat rate amount, or an increased flat rate is used.

The table below summarises the different calculation methods of benefit in kind values for a company car that is owned (not rented) by the company: