Petrol/diesel, a new government and new opportunities for businesses

An increase of approximately 10% is planned for 2018 in the price of diesel fuel in order to bring it in line with gasoline prices. This increase equates to 7 euro cents per liter.

But that’s not all; gasoline will also be affected, with an increase equivalent to 4 euro cents per liter. Taxes will therefore be raised for both fuels, with the increase for diesel coming in slightly earlier, again with the aim of aligning these two tax systems.

For businesses, VAT recovery on gasoline will be phased in over a period of 5 years. This will allow them to recover approximately 20% in 2018, and an additional 20% each year thereafter. Light commercial vehicles will be able to recover 100% of the VAT on gasoline starting in 2018. A 5-year alignment of tax systems and a phased VAT deduction on gasoline for businesses.

This is a measure that has been requested for many years by the Corporate Vehicle Observatory and by many professionals in the automotive sector. Until now, VAT on fuel was only recoverable on diesel. Starting in 2018, the VAT deduction rate on gasoline will increase for commercial vehicles year by year, in stages, to be in line with the regime for E85 superethanol and diesel.These VAT deduction measures also apply to vehicles leased by a company. For vehicles that run on natural gas, LPG, or electricity, VAT will be 100% deductible regardless of the vehicle type.

In France, diesel is the most widely used fuel, so this represents a major change by providing a tax advantage on gasoline for businesses. Indeed, companies have, until now, built their vehicle fleets based on the tax treatment granted to diesel fuel.
This measure came into effect in 2017 with a 10% reduction and is expected to reach 80% in 2021 for passenger cars and 100% for light commercial vehicles.

This gradual transition aims to allow automotive industry professionals to adapt to these new reforms without being massively impacted. The goal is also to eliminate the inequality between the two fuels and allow companies to choose gasoline models if they wish to renew their vehicle fleets.

The issue is also environmental, and manufacturers must meet new targets for 2020 by developing vehicle models that do not exceed 95 g of CO2/km. The aim is for all new vehicles to comply with this limit by 2021. In case of non-compliance, very heavy fines will be issued for exceeding this value.

Representation of company car fleets.

For several years now, diesel vehicles have been targeted by public authorities, environmental organizations, and the general public alike.

Until now, diesel has benefited from a highly advantageous tax regime, including VAT deductions for fuel, the indexing of the company car tax (TVS) to CO2 emissions, and a favorable bonus-malus system. In addition to all these advantages, it perfectly meets the needs of businesses in terms of its ability to cover long distances each year and its efficiency in handling heavy loads while maintaining its power. From now on, it will be treated the same as gasoline vehicles in terms of taxation, which should encourage companies to switch to vehicles that emit less carbon dioxide, whether gasoline, hybrid, or newer diesel models that meet new standards.

It is primarily older diesel vehicles that have been targeted by the government for several years now. Through a series of carefully considered and adjusted measures, a gradual decline in purchases of these types of vehicles has been observed since 2012, in favor of newer vehicles for renewing company fleets.

Currently, gasoline vehicles are increasingly chosen by companies driving less than 20,000 km per year, particularly following the evolution of European standards for pollutant emissions and also since the Euro 6 standard, which requires automakers to offer new gasoline engines. Restrictions on diesel vehicles in certain major cities also play a role.

As a result, there was an increase of approximately 30% in gasoline car purchases by companies in 2016 alone, thanks to mechanisms such as
business car leasing.