Only certain professional vehicles qualify for value-added tax (VAT) deductions, but how do you determine which ones? You might be wondering what the conditions are to qualify, or what the difference is between a company vehicle and a passenger car when it comes to VAT. This article covers these common questions and more. Learn about deductible VAT on company vehicles below.

What’s in this article?

• What kinds of vehicles are VAT-deductible?
  
• What are the rules for VAT deduction?
  
• What purchases are VAT-deductible?
  
• Can you always reclaim VAT on fuel?
  
• How can you reclaim VAT on a professional vehicle?
  

What kinds of vehicles are VAT-deductible?

In France, you can reclaim VAT on the purchase of certain professional vehicles.

VAT on commercial vehicles

You can deduct VAT on commercial vehicles, such as lorries and vans, used for transporting goods. You can also deduct maintenance and repair costs on these vehicles.

VAT on company vehicles

You can also deduct VAT on certain company vehicles used for the transportation of goods. These are often private vehicles converted into company vehicles by removing the rear seats. To qualify for a VAT deduction, these vehicles cannot include the following:

• More than two front passenger seats
  
• Rear fixing points for additional seats
  

From a tax perspective, company cars that meet these qualifications fall under the category of commercial vehicles – thus you’re allowed to reclaim VAT on their purchase.

VAT on passenger vehicles

Generally, you can’t reclaim VAT on vehicles you buy for passenger transport or mixed use. Private cars, also called passenger vehicles, don’t get the same tax benefits as commercial and company vehicles, even when a company buys them.

However, companies buying vehicles for passenger transportation, or to be used as rental or driving school vehicles can reclaim VAT on their purchases.

What are the rules for VAT deduction?

To qualify for a VAT deduction, a company must have purchased a vehicle for business use. The purchase must include a document (e.g., an invoice) that shows the VAT the company intends to deduct. Additionally, the company must use the vehicle for a purpose that qualifies for a VAT deduction.

It’s important to note that the vehicle purchaser must be subject to VAT. Any business under the basic VAT exemption system or carrying out a VAT-exempt activity can’t reclaim VAT on their vehicle.

If your business is liable for VAT, you can simplify your entire tax process with Stripe Tax, an advanced tool that automates tax calculations and speeds up VAT return filing.

What purchases are VAT-deductible?

You can reclaim VAT for the:

• Purchase of a qualifying professional vehicle
  
• Financing or long-term leasing of a qualifying vehicle
  
• Maintenance and repair of a qualifying vehicle
  
• Fuel
  

Can you always reclaim VAT on fuel?

VAT on fuel for a commercial or company vehicle used for business purposes is fully deductible. The fuel may be petrol, diesel, liquefied petroleum gas (LPG), or electricity.

However, VAT on fuel for a private vehicle used for business purposes is only partially deductible. The percentage at which the VAT is deductible depends on the type of fuel.

• Petrol and diesel are both deductible at 80%.
  
• LPG and electricity are 100% deductible.
  

How can you reclaim VAT on a professional vehicle?

To reclaim VAT on a qualifying business vehicle, fill in your VAT declaration based on the chosen tax system and submit it to your local corporate tax office (service des impôts des entreprises, or SIE). You can also learn how to declare VAT in our related article. The VAT declaration must include a copy of the supporting invoice to help with any required audits.

If the VAT collected on sales is less than the VAT deductible on business expenses, you’ll receive a VAT credit, either partially or fully refunded or deducted. To find out more about VAT calculations, deductible VAT, and VAT credits, you can read our related articles.