Company Vehicle Tax (TVS) in 2025: The Complete Guide to Optimizing Your Fleet

The 2025 tax shock is here. With the end of the TVS (Company Vehicle Tax), taxation on your vehicle fleet is becoming more demanding and costs are rising, particularly with the end of the exemption for hybrids. Rather than suffering this change, anticipate it. This comprehensive guide breaks down the new rules for you and provides winning strategies to optimize your budget and modernize your fleet now. 

What is the company vehicle tax (TVS)?

The company car tax (TVS) is an annual tax that applies to passenger cars owned or used by companies. Introduced in 2006 to replace a previous tax dating back to 1974, it aimed to tax company vehicles based on their technical and environmental characteristics. Since 2025, the TVS has been replaced by a new, more environmentally friendly and incentive-based tax system.

From TVS to Taxes 2025: Understanding the Tax Revolution

The Company Vehicle Tax (TVS), which companies had been familiar with for years, has been officially replaced by a set of taxes on the use of vehicles (formerly TVS) for economic purposes, a measure aimed at better aligning taxation with environmental issues. This transformation, which has been gradual since 2022, will be fully effective in 2025 with stricter rules.

History of the TVS for a better understanding 

• 2006-2021: The traditional TVS, based on CO2 emissions or fiscal power and vehicle age.
• 2022-2024: Transition period during which the TVS is replaced by two separate taxes, paving the way for the new system.
• 2025: Application of a new environmental tax framework with stricter rates and the end of certain key exemptions.

The Two Pillars of Corporate Vehicle Taxation in 2025

Since 2025, your fleet's taxation has been based on two main annual taxes, plus an incentive tax for larger fleets.

1. Annual tax on CO₂ emissions: This is the core of the system. Its aim is to penalize vehicles with the highest carbon dioxide (CO₂) emissions financially, thereby encouraging the choice of cleaner models.
2. Annual tax on air pollutant emissions: Having replaced the age tax in 2024, it targets pollutants that are harmful to health (fine particles, nitrogen oxides) based on the vehicle's Crit'Air category.
3. Incentive tax for large fleets: New in 2025, this tax applies to companies managing a fleet of more than 100 vehicles to accelerate compliance with the greening quotas imposed by law.

Focus on the Annual CO₂ Emissions Tax

This is the tax that has the greatest impact on your costs. Its calculation depends on:

• The CO₂ emission rate in g/km.
• The vehicle approval procedure (WLTP for the most recent models, NEDC for others).
• For some older vehicles, the fiscal power (administrative horsepower).

The objective is clear: to make the purchase and ownership of high-emission combustion engine vehicles increasingly expensive.

Focus on the Annual Tax on Air Pollutant Emissions

This tax is calculated according to a fixed scale that depends on the vehicle's emission category, determined by its fuel type and Euro standard. Diesel vehicles and older models are generally taxed more heavily. The amount varies from €0 for the cleanest vehicles (electric, hydrogen) to €500 for the most polluting ones.

Is your company affected?

Almost all businesses are affected. In fact, all companies, regardless of their legal status (SAS, LLC, etc.), are liable for this tax if they own or use vehicles for economic purposes.

This tax mainly targets passenger vehicles (private cars) used for business purposes: transport of goods, transport of people (taxis, private hire vehicles), deliveries, business travel, etc. This applies to passenger vehicles that are purchased, leased on a long-term basis (more than 30 consecutive days), or even to employees' vehicles if the company reimburses mileage expenses (according to specific rules). Only sole proprietorships are exempt from this obligation. 

Who can be exempted?

Certain situations allow for total exemption from these two annual taxes:

• Sole proprietorships (EI, including micro-entrepreneurs) are exempt.
• Vehicles that are 100% electric or hydrogen-powered.
• Vehicles used for specific activities such as passenger transport or public transport (taxis, private hire vehicles), driving instruction, or agricultural use.
• Non-profit and public interest organizations, subject to conditions.

Which vehicles are subject to annual tax?

Vehicles subject to annual tax are those used by companies for economic purposes. These are mainly passenger vehicles (M1 category passenger cars, marked “VP”). This category has been expanded to include certain light commercial vehicles (N1) which, as they are not used exclusively for the transport of goods, are treated as vehicles for economic purposes. This includes “vans” or “pickup trucks” with several rows of seats (at least 5 for pickup trucks), as they can also be used to transport passengers. The type of vehicle and the number of seats are therefore essential factors. 

The Case for Electric and Hybrid Vehicles in 2025

• 100% electric vehicles: These remain the best choice for tax optimization, as they are completely exempt from both annual taxes.
• Hybrid vehicles: Please note that there will be a major change in 2025! The exemption enjoyed by hybrid vehicles (including rechargeable models) will be abolished. They will now be subject to CO₂ tax like other vehicles.
• Superethanol E85: Vehicles that run exclusively or partially on E85 benefit from a 40% reduction in their CO₂ emissions, unless these exceed 250 g/km.

How to Calculate Your Taxes?

The exact calculation depends on each vehicle.

For the CO₂ tax 

• Identify the correct scale: WLTP (vehicles registered after March 2020), NEDC, or fiscal power.
• Apply the marginal rate: The calculation is made in emission brackets. For example, for a WLTP vehicle emitting 120 g/km, the cost of each bracket is added together until 120 g is reached.
• Adjust the calculation to the duration of use: The tax is payable for the exact number of days the vehicle was used by the company during the calendar year.

For the tax on pollutants 

• Determine the vehicle category based on its fuel type and Euro standard (e.g., Euro 6 gasoline, Euro 5 diesel).
• Apply the corresponding fixed annual rate (e.g., €100 for a Euro 5/6 gasoline vehicle).

Concrete Examples

• Vehicle 1: A recent gasoline SUV (2022), emitting 145 g/km of CO₂ (WLTP). It will be subject to CO₂ tax according to the progressive scale and to the pollutant tax (€100).
• Vehicle 2: A 2017 diesel sedan (Euro 6). It will be subject to a CO₂ tax (calculated according to the NEDC scale) and a higher pollutant tax.
• Vehicle 3: A 100% electric city car. It does not generate either of the two annual taxes.

Declaration and Payment: How to Stay Compliant?

Taxes must be declared and paid once a year. The tax return for year N must be filed in January of year N+1. For example, taxes due for the year 2024 must be declared and paid in January 2025. Failure to comply with these obligations may result in financial penalties. All procedures are carried out online via the website: impots.gouv.fr, where companies can access the necessary forms and services.

How to Optimize Your Fleet's Taxation in 2025? 

Given these new rules, passive management of your fleet is no longer an option. Here are the levers you need to activate:

1. Accelerate the greening of your fleet: The trade-off is clear. Each time you replace a combustion engine vehicle with a 100% electric model, you generate direct and recurring savings on these taxes.
2. Audit your current fleet: Identify the vehicles that are most costly in terms of taxes. These are your priority targets for renewal.
3. Simulate the impact of the new rules: Use the 2025 scales to accurately calculate the total cost of your fleet and avoid unpleasant surprises.
4. Take advantage of purchase subsidies: Even though the eco-bonus has changed, subsidies are still available for the purchase of clean vehicles. They are an essential lever for financing the energy transition.

Frequently Asked Questions (FAQ)

What are vehicle allocation taxes?

The allocation of vehicles is the determining factor for the application of the corresponding taxes. It refers to the use of a vehicle in the context of a company's professional activity. When a vehicle is used for economic purposes, companies become liable for taxes on its use. This system was specifically designed to target the professional use of vehicles. Thus, use for economic purposes is the main factor determining this taxation. 

How does the date of entry into service influence the calculation?

The date on which passenger vehicles are first registered is crucial. It determines the method used to calculate the tax and the applicable scale (NEDC or WLTP). For vehicles registered several years ago, the calculation may also depend on the fiscal power or the number of seats. This rule, which applies to all companies concerned, replaces the previous approach based on the age of the vehicles. The emissions tax rate is directly linked to the date on which the vehicle was first registered.

How is the CO₂ emissions tax calculated?

The tax amount is calculated based on CO₂ emissions (in g/km). For some older vehicles, horsepower is used. The annual tax rate is progressive: the higher a vehicle's emissions, the higher the rate.

What is the difference between the CO₂ tax and the tax on air pollutants?

The first tax on emissions targets CO₂. The second annual tax targets air pollutants (NOx, fine particles). It is a flat rate and depends on the type of vehicle and its Euro standard, similar to a Crit'Air sticker (annual rate). The aim is to tax both CO₂ and pollutants. The tax on air pollutant emissions penalizes older vehicles more heavily.

Is the amount of this tax adjusted if a vehicle is not used all year round?

Yes. The amount is calculated based on the exact number of days the vehicle is used by one of the companies during the tax period. The annual return must reflect this number of days for each vehicle. 

How does the tax break for E85 superethanol affect vehicle tax? 

It allows for a 40% reduction in the CO₂ component, which lowers the amount of tax paid by the company for compatible vehicles. This measure aims to encourage the use of alternative fuels and reduce pollutant emissions.