Providing an employee with a company car creates a benefit-in-kind (BIK), a non-cash element of compensation that must be valued, declared, and included in the social security contribution base. For fleets shifting to electric, the rules changed twice in quick succession: the decree of 25 February 2025 raised the flat-rate assessment for all vehicles and, at the same time, strengthened the discount reserved for fully electric cars. The result is that the BIK on an electric vehicle is now significantly lower than on an equivalent combustion-engine car, provided you apply the correct rate, choose between the flat-rate and actual-cost method, and report it properly. This guide covers everything you need to know.
- From 1 February 2025, flat rates rise to 15 % of the purchase price (10 % for vehicles over 5 years old) and to 50 % of the annual leasing cost[1].
- Fully electric vehicles benefit from a 70 % discount, capped at €4,582/year, through 31 December 2027[2].
- The BIK is included in gross salary: it is subject to social security contributions (French social security authority) and the employee's income tax[3].
The 25 February 2025 Decree: What Changes for All Vehicles
For over twenty years, the flat-rate BIK assessment was governed by the decree of 10 December 2002: 9 % of the purchase price for a recent vehicle, 6 % after five years, and 30 % of the annual leasing cost. The decree of 25 February 2025, published in the Official Journal on 27 February, repeals that text and materially increases the flat rates[1]. The rules apply to vehicles made available for personal use, including commuting and private trips. Purely professional use does not constitute a benefit-in-kind.
Timing matters: the new rates apply to vehicles made available from 1 February 2025 onwards. A vehicle assigned before that date retains the old rate schedule for 2025, with a prorated transition into 2026. This tightening is part of a broader shift in vehicle-related taxation. It is also worth considering other charges such as the annual company vehicle tax (formerly TVS), which operates under its own rules.
| Situation | Old flat rate | New flat rate (2025 decree) |
|---|---|---|
| Purchase, vehicle under 5 years | 9 % of VAT-inclusive purchase price | 15 % of VAT-inclusive purchase price |
| Purchase, vehicle over 5 years | 6 % of VAT-inclusive purchase price | 10 % of VAT-inclusive purchase price |
| Lease or PCP | 30 % of total annual cost | 50 % of total annual cost |
Employers can still choose between the flat-rate method and the actual-cost method (fuel, maintenance, insurance, depreciation). Either approach is valid, but once selected for a given vehicle it applies for the full year. On cost components, our guide to recovering French fuel excise tax (TICPE) and VAT on fuel details what does and does not count as a vehicle-related expense.
The EV Advantage: 70 % Discount Capped at €4,582
This is where electric wins. For fully electric vehicles made available between 1 February 2025 and 31 December 2027, a 70 % discount applies to the BIK calculated above, capped at €4,582 per year[2]. Before the reform, the discount was 50 %, capped at €2,000.30. The tax-free ceiling has more than doubled. For partial years, the cap is prorated accordingly.
Eligibility is strict: the discount only applies to fully electric vehicles (battery-only). Plug-in hybrids are excluded from the reform and are treated the same as combustion-engine cars for BIK purposes[4]. Employer-paid charging costs for a fully electric vehicle do not constitute a separate benefit-in-kind. For a hybrid, however, fuel costs are included in the assessment base. This is worth checking carefully when building your list of eligible vehicles.
Going electric doesn't eliminate the BIK. It dramatically reduces it. Under the flat-rate method, the 70 % discount (subject to the cap) typically cuts the taxable benefit to a fraction of what it would be for an equivalent combustion vehicle, boosting employee take-home pay and keeping employer costs under control.
Step-by-Step Calculation
Take a concrete example: a fully electric saloon purchased for €44,000 VAT-inclusive, made available in March 2025. Flat-rate method: 15 % of €44,000 gives a base of €6,600. Apply the 70 % discount: €4,620, but the cap is €4,582, so that figure applies. The taxable benefit-in-kind comes to €6,600 − €4,582 = €2,018 per year[2].
Compare that to a combustion-engine car at the same price. With no discount, the BIK stays at €6,600. The gap exceeds €4,500 per year per vehicle. Multiply that across a fleet and it becomes a structural saving. On leases and PCP agreements, the logic is the same: 50 % of the annual cost, then the 70 % capped discount for a fully electric vehicle. For companies that also reclaim VAT and excise duty on charging and fuel, the net gap widens further. A corporate fuel card centralises receipts and simplifies this tracking.
There is still room for judgement: flat rate versus actual cost. For a low-mileage second-hand vehicle with minimal maintenance, the 10 % flat rate (over-5-year bracket) may be the most favourable. For a brand-new vehicle with heavy depreciation and servicing costs, the actual-cost method (which includes insurance and maintenance) is worth modelling. The decision is made vehicle by vehicle, not as a blanket policy.
Declaration, French Social Security Authority, and Payslips
The benefit-in-kind is a component of gross salary. The employer adds it to pay on the payslip and reports it in the Nominative Social Declaration (DSN), under the dedicated benefit-in-kind entries[3]. It feeds into the social security contribution base (French social security authority, pension, unemployment insurance) and, on the employee's side, into their taxable income for income tax purposes.
In practice, the BIK increases the employee's taxable income. No cash changes hands, but the employee effectively pays contributions on remuneration they never receive as money. This is precisely why accurate valuation matters: under-reporting exposes the company to an audit with late-payment interest, while over-reporting needlessly reduces the employee's net purchasing power. The 2025 reform mechanically increased the BIK on combustion-engine vehicles. Correctly applying the EV discount has therefore become a critical payroll checkpoint.
Check the date of first availability. A vehicle assigned before 1 February 2025 remains under the old rate schedule for 2025, with a prorated transition in 2026. A vehicle assigned after that date falls under the new 15 %/10 %/50 % rates. Mixing the two up creates significant errors in the contribution base.
Frequently Asked Questions
What is the benefit-in-kind for an electric company car in 2026?
Start with the flat-rate BIK (15 % of purchase price for a recent vehicle, 10 % for one over 5 years old, 50 % for leases), then apply a 70 % discount capped at €4,582 per year for a fully electric vehicle[2]. The result is substantially lower than for an equivalent combustion-engine car.
Does a plug-in hybrid qualify for the 70 % discount?
No. Since the reform, the enhanced discount is reserved for fully electric vehicles only. Plug-in hybrids are treated the same as combustion-engine vehicles for BIK purposes, and fuel costs are included in the assessment base[4].
How do you choose between the flat-rate and actual-cost method?
The employer chooses on a per-vehicle, per-year basis. The flat rate (15 %/10 %/50 %) is simpler. The actual-cost method incorporates fuel, maintenance, insurance, and depreciation, and may be more favourable for a high-running-cost vehicle. Either approach is valid: pick the most advantageous one[1].
Is the benefit-in-kind subject to social security contributions?
Yes. The BIK is part of gross salary, reported in the DSN. It is included in the social security contribution base and in the employee's taxable income[3].
Are charging costs a benefit-in-kind?
For a fully electric vehicle, employer-paid charging costs do not constitute a separate benefit-in-kind. They remain deductible for the company under standard rules.
How long does the 70 % discount apply?
The enhanced discount applies to fully electric vehicles made available between 1 February 2025 and 31 December 2027[2]. Beyond that date, the rate schedule will need to be confirmed by a new decree.
Pillar guide: this article is part of our business taxation white paper.
References
- Légifrance, Decree of 25 February 2025 on the flat-rate assessment of benefits-in-kind for social security contribution purposes (rates: 15% / 10% / 50%). legifrance.gouv.fr. ↩
- French social security authority (URSSAF), Benefits-in-kind: 70% discount for electric vehicles (cap €4,582/year), applicable from 1 February 2025 to 31 December 2027. urssaf.fr. ↩
- Net-entreprises, Benefits-in-kind: reporting in the DSN (dedicated entries, integration into gross salary). net-entreprises.fr. ↩
- Drive to Business, Benefits-in-kind for electric, combustion-engine, and plug-in hybrid vehicles: eligibility and conditions. drivetobusiness.fr. ↩
