Company vehicle taxes 2026: CO₂ schedules

The underlying principle, taxing vehicles owned or used by a company, remains, but the tax base has been restructured to align with European tax policy. Today, a single tax base triggers two cumulative taxes: the annual tax on CO₂ emissions, and the annual tax on air pollutant emissions. The total owed for a vehicle is the sum of both^[1].

The legislature intended for the tax to fall mainly on carbon-heavy powertrains and less on clean vehicles: an electric vehicle exits the system almost tax-free, while an older diesel pays a double bill. This article complements our TICPE fuel duty recovery guide and our guide to tax optimisation of expense reports.

The company vehicle tax applies to any vehicle used for economic purposes in France, provided two conditions are met simultaneously: the vehicle is authorised to drive on public roads (valid registration certificate) and it is connected to the company's business activity. Three situations trigger this connection^[2]: the company owns the vehicle (outright ownership, long-term lease of at least two years, or finance lease), it covers professional costs associated with the vehicle (mileage reimbursement), or the vehicle operates in France for business purposes.

The tax applies to passenger cars (M1 category) and certain light commercial vehicles under 3.5 tonnes (N1 category: panel vans with at least three rows of seats, five-seat pick-ups). Sole traders are exempt. The tax is calculated pro rata for days in use: a vehicle acquired mid-year is only taxed for the relevant fraction of the year.

This is the heavier component for a fossil-fuel fleet. The annual charge is the result of a progressive bracket schedule applied to the vehicle's CO₂ emissions in grams per kilometre. The WLTP schedule applies to vehicles whose emissions were measured under this test cycle at their first registration in France, which is now the standard case^[3]. Each bracket is multiplied by a marginal rate, and the results are then summed.

The lower brackets are nearly free, but the marginal rate rises steeply above 125 g/km. A vehicle emitting 100 g/km incurs approximately €213 in CO₂ tax. At 160 g/km, the bill exceeds €1,500. This design pushes companies towards lower-emission powertrains — which is its stated objective.

The second component depends on the vehicle's air pollutant emissions category, which maps to the French Crit'Air sticker system. Three annual rates apply in 2026^[4]: €0 for category E (electric, hydrogen, green sticker); €130 for category 1 (petrol, hybrid and gas Euro 5 and 6, purple sticker); and €650 for the most polluting vehicles (yellow to grey stickers and unclassified). This flat rate is added on top of the CO₂ tax.

The gap between an electric vehicle and an older diesel can easily exceed €2,000 per year for the same usage pattern. Across a fleet of fifty vehicles, the powertrain decision becomes a genuine cash flow issue — not just a CSR policy question.

The regime provides several exemptions. The most significant: vehicles powered exclusively by electricity, hydrogen, or a combination of both are exempt from the CO₂ tax and also pay no pollutant tax^[5]. This is the tax relief that makes fleet electrification immediately cost-effective on this line item. By contrast, and this is the most debated change of 2025, hybrid and plug-in hybrid vehicles are no longer exempt from the CO₂ tax as of 1 January 2025.

Other partial exemptions exist. Vehicles running on E85 superethanol benefit from a 40% reduction on their CO₂ emissions (or a 2 CV reduction) since 2025, capped at 250 g/km or 12 CV. Certain activities are exempt: taxis and private hire vehicles (VTC), public passenger transport, agricultural and forestry activities, driving instruction, and motorsport competition. Wheelchair-accessible vehicles and replacement vehicles provided while a primary vehicle is off the road are also excluded.

The company vehicle tax is filed online at impots.gouv.fr, via a supplementary form attached to the VAT return. Companies under the standard tax regime file form 3310-A-SD during January of the year following the tax period^[6]. Those under the simplified regime use form 3517, which must be filed before 3 May for a financial year ending on 31 December. Companies not subject to VAT also file on form 3310-A-SD, in January.

Taxes paid in 2026 cover vehicles used during 2025, and payment is due at the time of filing. Companies must maintain an annual summary schedule per vehicle (first registration date, technical specifications, energy source, CO₂ emissions), which is not attached to the return but must be made available in the event of an audit. A €15,000 deduction applies to taxes due on vehicles covered under employee mileage reimbursement arrangements.

The ex-TVS is not just an accounting line item: it is a price signal on fleet composition. A company that renews its vehicles without considering CO₂ emissions and Crit'Air categories is locking itself into a tax that rises every year: the schedules are tightened annually through 2027. Conversely, an electrification transition plan, combined with our multi-network fuel card, absorbs the residual tax while recovering VAT and fuel duty on remaining fossil-fuel vehicles.

The right approach: cross-reference, for each vehicle, the expected CO₂ tax, the pollutant flat rate, and the VAT/fuel duty savings recoverable. An EV that looks expensive to purchase becomes cost-competitive once you factor in zero ex-TVS liability and lower energy costs.