When an employer provides an employee with a vehicle, other than a utility one, it may be considered a benefit in kind. However, it is important to distinguish between a service car and a company car. While the former is not considered a benefit in kind, the company car is in the eyes of the URSSAF. Therefore, in these cases, social security contributions are applicable.
What is a benefit in kind?
When an employer provides his employees with a good or service free of charge or at a preferential rate for his personal use, it is a benefit in kind. According to regulations, this type of benefit must appear on the payslip as a gross salary component. It is therefore subject to social contributions and included in the calculation of the minimum wage.
Among the various benefits in kind, the most common are:
- Company housing,
- Company car,
- Communication tools.
For a vehicle to be considered a benefit in kind, the employee must be able to use it outside of working hours, freely, within the limits imposed by his employer such as annual mileage, national borders, etc.
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What is the difference between a service vehicle and a company vehicle?
A service car is made available to an employee strictly for his professional activity. According to his employer’s instructions, the employee may go home with the vehicle after his working day. However, he must return it to the company for the weekend and vacations and may not use it for his personal use. It is therefore not a benefit in kind.
The company car is made available to an employee for his professional and personal use. He may use it in his free time, during weekends or vacation periods, in accordance still with the written arrangements made with his employer. In this context, it is a benefit in kind subject to social contributions and accounted for when evaluating the gross salary.
How to calculate the value of a benefit in kind?
To calculate the value of the benefit in kind, the employer or car fleet manager has two options if he does not have a car fleet management tool that automates the computation. They can base their calculations on the amount of value actually incurred during the use of the vehicle, or they can base it on an annual flat rate.
The first option is based on a straight-line depreciation of 20% per year over 5 years for a new vehicle or 10% for a vehicle over 5 years old. The cost of insurance, maintenance, and fuel must then be added. For a leased vehicle, you must take into account the amount of the annual lease, including all taxes, then add the other costs as listed above. In both cases, the advantage is defined as the number of kilometres privately achieved with the vehicle over the total realized with the vehicle during the year.
If the employer decides to make a lump-sum assessment, the benefit corresponds to 9% of the purchase value including taxes for a new vehicle or 6% if the vehicle is more than 5 years old. If the employer pays for fuel expenses, a rate of 12% for a new vehicle or 9% for a vehicle over 5 years old should be added.
If the vehicle is leased and the benefit in kind is calculated on a flat rate basis, the employer must apply a rate of 30% to the total annual cost of the vehicle, excluding fuel costs. If the employer pays for the fuel, the rate increases to 40% of the overall cost.
In all cases, the value of the benefit in kind should be adjusted to the length of time the vehicle was made available for.
Electric vehicles: 50% deduction on in-kind benefits
Since January 2020, when an employer provides an employee with a 100% electrically powered vehicle, the calculation of the benefit in kind does not take into account the electricity paid by the company to charge the vehicle battery. Moreover, a 50% deduction should be applied, capped at €1,800 a year.
In the case of a lease with a purchase option or long-term rental, the employer will use a rate of 30% of the total annual cost, excluding electricity, to assess the value of the benefit in kind that should be retained.
On the other hand, if the company has a charging station installed and made available to its employees between January 1, 2019, and December 31, 2022, personal use has no impact on the calculation of the benefit in kind.
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