French fuel deductions to increase in 2018

Until now, French companies could not deduct VAT on petrol used in passenger cars. On the other hand, in 2017, a deduction of up to 10% was allowed for commercial vehicles.

As of January 1, 2018, this partial deduction is increased to 20%, regardless of whether the vehicle is a passenger car or utility vehicle.

The right to deduct VAT is subject to several conditions. In particular, the company must use the fuel for the purposes of its activity – which is itself subject to VAT. And it must be in possession of an invoice detailing the VAT amount.

For example: A company pays a fuel bill of €600, including €100 VAT. Under the new rules, it will be able to deduct €20 (€100 x 20%).

Deductible VAT will increase to 40% in 2019, 60% in 2020 and 80% in 2021. Only commercial vehicles will benefit from a 100% deduction from 2022 onwards.

Author: Bettina Cassegrain, HLB Technical Director and Global Assurance Leader