Company Car Tax: 2026 Guide

The company car tax applies every year to most passenger cars owned or leased by a company for its business activity. In 2022 it replaced the former TVS with two separate taxes, one based on CO2 emissions, the other on air pollutant emissions. This guide covers who is liable, which vehicles are covered or exempt, how to calculate the amount owed, and how to declare this tax in 2026.

Company car tax: the essentials

• Two separate annual taxes since 2022: one on CO2 emissions, the other on air pollutants, replacing the former TVS.
• Liable: any company that owns or leases (for more than 3 months) a passenger car allocated to its business, including employees’ personal vehicles reimbursed per kilometre above a certain threshold.
• Full exemption for 100% electric or hydrogen vehicles, as well as utility vehicles not classified as passenger cars.
• The amount owed depends on the CO2 emissions level measured under the WLTP cycle and on the engine type for the pollutants component.
• Declared and paid once a year, through the dedicated annex of the company’s VAT return.

2026 scale: how much does the company car tax cost?

The CO2 emissions tax follows a progressive scale applied gram by gram above an exemption threshold set at 20 g/km for vehicles measured under the WLTP cycle. This scale is revised every year by the tax authorities: the rates below give the order of magnitude applicable in 2026, to be checked against the official scale in force at the time of calculation.

On top of this first component comes the air pollutant emissions tax, a flat amount that does not depend on CO2 but on the vehicle’s engine type and Euro emissions standard: from a few tens of euros for a recent vehicle meeting the strictest standards, up to several hundred euros for an older diesel. Both amounts add up to the total owed per vehicle for the year.

What is the company car tax?

The company car tax refers, in everyday language, to a levy that changed shape in 2022 without changing its principle: making companies that allocate polluting passenger cars to their business activity contribute accordingly. Until 2021, this levy was known as the TVS (taxe sur les véhicules de société) and combined both criteria, CO2 and pollutants, into a single calculation settled quarterly.

Since 1 January 2022, the TVS has been replaced by two annual taxes on the allocation of vehicles for economic purposes, often referred to by the acronym TAVTFE. The first covers CO2 emissions, the second air pollutant emissions. The main change for companies lies less in the overall amount, which stays broadly close to the former calculation, than in the filing schedule: both taxes are now settled once a year rather than quarterly, which simplifies fleet administration.

Who is liable for the company car tax?

Companies are liable for this tax, regardless of their tax regime (corporate tax or income tax), when they own or use a passenger car allocated to their business activity in France. Allocation does not necessarily mean full ownership: a vehicle leased for more than three months, under a long-term lease or finance lease, places the leasing company within the scope of the tax just as much as a direct purchase would.

One particular case deserves attention: an employee’s or executive’s personal vehicle, used for business trips and reimbursed per kilometre by the company. Once the professional mileage reimbursed exceeds an annual threshold set by the tax authorities, this vehicle also falls within the tax base, prorated to its actual business use. This point is often underestimated by companies that own no vehicles themselves but reimburse substantial mileage expenses to their teams.

Which vehicles are covered — and which are exempt?

The tax primarily targets passenger cars, meaning cars registered in the VP category and certain multi-purpose vehicles registered as N1 but designed and fitted out like passenger cars. Strictly utility vehicles, such as vans, light trucks or flatbeds, generally escape the tax as long as their registration certificate does not classify them as passenger cars.

Several categories of vehicles benefit from full exemption, which should be checked case by case:

• Vehicles that are 100% electric or run on hydrogen, exempt from both components of the tax.
• Vehicles used exclusively for certain activities, such as driving instruction, public passenger transport, or short-term rental by a rental company.
• Vehicles held for sale by a manufacturer or dealer as part of their commercial activity.
• Vehicles adapted for people with disabilities, under specific conditions.

Plug-in hybrid vehicles with very low emissions may qualify for a partial or full exemption from the CO2 component when they fall under the 20 g/km threshold, but generally remain subject to the pollutants component based on their combustion engine.

How do you calculate the company car tax?

The calculation is carried out vehicle by vehicle, then totalled across the company’s entire eligible fleet. For each vehicle, the CO2 tax, obtained by applying the progressive scale to the grams above the exemption threshold, is added to the pollutants tax, a flat amount set according to engine type and Euro standard.

Example calculation

A company allocates to its business a combustion-engine vehicle emitting 135 g/km of CO2 under the WLTP cycle, meeting Euro 6 standards. The CO2 component falls in the 121 to 140 g/km bracket, at about €6.5 per gram above the threshold, for an annual tax of around €850. The pollutants component, for a recent vehicle meeting the strictest standards, adds a flat amount of a few tens to about a hundred euros. The total annual amount owed for this vehicle therefore comes to around €900 to €950, compared with a full exemption had the company chosen an equivalent electric model.

When a vehicle is allocated to the company’s business for only part of the year, the tax amount is calculated pro rata to the number of days or quarters of allocation, which limits the bill for a vehicle acquired or sold during the financial year.

How do you declare and pay the company car tax?

Since the 2022 reform, both taxes are declared and paid once a year, through the dedicated annex of the company’s VAT return: the CA3 return for companies under the standard real regime, or a specific annual return for those under the simplified regime. The company must list all eligible vehicles allocated to its business over the year, calculate the tax owed for each, then report the total on the corresponding return.

One mismatch with standard annual taxation is worth anticipating: the reference period used for the calculation does not always match the company’s accounting year, which requires separate tracking of the vehicle fleet throughout the year to avoid any filing error.

How can you reduce the company car tax?

The first lever remains the choice of vehicle when acquiring or renewing the fleet: an electric or very low-emission model eliminates the tax altogether, a factor worth weighing as part of how to choose a company car. This choice also has knock-on effects on other areas of company taxation, notably the company car depreciation cap, which is markedly more favourable for electric vehicles.

The financing method chosen also affects the overall cost borne by the company: weighing purchase against long-term leasing or finance leases, covered in this guide on long-term car rental for businesses, helps shape the fleet without tying up capital in heavily taxed vehicles. Finally, the company car tax is just one line among others in a fleet’s total cost of ownership: the guide on how to reduce business transport costs covers complementary levers, from gradually greening the fleet to managing mileage reimbursements, which also affect the company car benefit in kind granted to employees.

Frequently asked questions