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Car Allowance and Mileage Reimbursement in France

One of the fine points of global mobility is how certain employee expenses are viewed and regulated under local laws.  We recently had a client ask us how to handle a car allowance and mileage reimbursement for their employee assigned in France.

There are two different possible situations with distinct rules: 1) driving a company provided car (allowance) or 2) using a personal vehicle for business activity (reimbursement). 

To complicate matters further, the mileage reimbursement rate will depend on the type of car being used and the horsepower of the engine.  The rate also changes depending upon the number of kilometers being driven for employment purposes.

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Reimbursement Rates When an Employee is Using their Own Car

Mileage reimbursement is non-taxable in France and exempt from social contributions (within these limits). Here is a quick breakdown of estimated reimbursement for a 6HP vehicle:

  • Up to 5000 KM = distance x .568 Euros
  • From 5001 KM to 20,000KM = distance x.32 Euros (plus a 1244 Euro flat bonus)
  • Over 20,000KM = distance x .382

These rates change for vehicles with less or more horsepower, so the type of car must be known before calculating the rate.  All of this has to be reconciled at year end to work out the correct reimbursement rate, something that an HR department may be challenged to do from abroad.  This was the situation with our client, and once we knew the type of car we could give them the correct reimbursement rate.

There are two other car-related rules that are good to know in France:

Use of a Company Car

If the company owns the car, and provides it to the employee then it is a taxable benefit in kind, equal to 9% of the purchase price (for new cars), or 30% of the payment for leased cars.  These amounts are added monthly to the payroll.

Car Allowance

A company can also give an employee an allowance to buy a car for both personal and business use, and the full amount is taxable to the employee. (but they can be reimbursed for company use based on the above formula)

All of these different rules and calculations to payroll can take a lot of time for HR departments that are unfamiliar with French laws.  This is where Shield GEO can make your employee assignments much simpler, by handling all aspects of the payroll, withholding, contributions and deductions to ensure full compliance with French rules.

Our local employer of record in France will make all of the calculations and adjustment to payroll as needed, so that you don’t have to worry about the details.

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