Vehicle depreciation 2026: caps and CO2

Quick answer. In 2026, the deductible depreciation of a company car is capped according to its CO2 emissions (art. 39-4 of the French tax code): 30,000 euros below 20 g/km (electric), 20,300 euros from 20 to 49 g, 18,300 euros from 50 to 160 g and 9,900 euros above 160 g. The excess fraction is added back to taxable income each year.

You buy a car for your company and record it as a fixed asset: for accounting purposes, you depreciate it over its full value. For tax purposes, it is not that simple. Part of this depreciation may never be deductible, and the gap rises quickly on high-end or high-emission models. It is one of the points we systematically review at year-end closing.

This article sets out the caps applicable in 2026, the add-back mechanism provided for in article 39-4 of the French general tax code, and the concrete trade-offs this implies before a purchase. We give a full worked example and the calculation method, so that you know what a vehicle above the cap actually costs in tax.

A passenger car recorded as a company asset is depreciated in the accounts over its useful life, generally four to five years. This expense reduces the accounting result. But lawmakers set a specific tax limit for passenger cars, codified in article 39-4 of the French tax code.

The aim is to prevent a company from deducting, without limit, the depreciation of an expensive or polluting vehicle. Above a cap set according to CO2 emissions, the corresponding depreciation fraction is not allowed as a deduction from taxable income.

The cap therefore does not depend on your accounting choice: it applies automatically. The more CO2 the vehicle emits, the lower the deductible cap. It is an incentive mechanism that favours electric and plug-in hybrid models.

Important point: this cap concerns only passenger cars, registered in category M1. Light commercial vehicles, vans and panel vans (category N1, marked "VU" or "CTTE" on the registration document) are not concerned and are depreciated without this type of limit.

The 2026 scale uses four emission brackets, expressed in grams of CO2 per kilometre. The rate to be used is the one measured under the WLTP standard, which appears on the vehicle registration document. The cap is assessed on the acquisition value including tax (TTC).

Cap scale by CO2 bracket (2026)#

The reading is straightforward: an electric vehicle benefits from the most favourable cap, at 30,000 euros, while a powerful petrol model above 160 g/km sees its deduction limited to 9,900 euros. The cap gap, from one to three, deeply changes the tax cost of the same purchase budget.

The upper threshold of 160 g/km is the value applicable in 2026 under the WLTP standard. Remember to check the vehicle's exact WLTP rate on the registration document: it determines the bracket, not a sales estimate or an older NEDC figure.

The mechanism is purely fiscal. You continue to record accounting depreciation on the full value of the vehicle. But each year, the part of that depreciation corresponding to the value exceeding the cap is added back, outside the accounts, to taxable income. It therefore does not reduce tax.

Here is the method for calculating this annual add-back.

1. Determine the acquisition price including tax (TTC) of the vehicle recorded as an asset.
2. Identify the WLTP CO2 bracket and the corresponding cap in the scale above.
3. Calculate the annual accounting depreciation: TTC price divided by the depreciation period used (for example five years).
4. Calculate the annual deductible depreciation: cap divided by the same period.
5. The difference between the two is the year's outside-the-accounts add-back, to be carried over onto the tax return.

This add-back is repeated each year as long as the vehicle is being depreciated. The sum of the add-backs over the period corresponds exactly to the fraction of the vehicle value exceeding the cap.

Take a company subject to corporate income tax that acquires a petrol saloon costing 45,000 euros TTC, emitting 155 g/km of CO2. It therefore falls within the 50 to 160 g/km bracket, with a cap of 18,300 euros. The vehicle is depreciated on a straight-line basis over five years.

Detail of the annual add-back#

Each year, 5,340 euros of depreciation are not deductible and increase taxable income. If this band of profit is taxed at the reduced corporate tax rate of 15% (applicable up to 42,500 euros of profit, under conditions), the additional tax is about 801 euros per year. At the standard rate of 25%, it would reach about 1,335 euros per year. Over five years, the non-deductibility covers a base of 26,700 euros.

The same 45,000-euro budget spent on a fully electric model, below the 30,000-euro cap, would have limited the add-back to the fraction above 30,000 euros only, i.e. a base of 15,000 euros over five years. The difference in tax treatment, for an identical purchase price, is real.

In the files we handle, the most frequent mistake is not a wrong calculation, it is the absence of any calculation. The director reasons on the purchase price and the monthly payment, rarely on the share of depreciation actually deductible. Yet it is that share which determines the expected tax saving.

Our view is simple: the depreciation cap must enter the decision before the order is signed, not after. For an equal budget, an electric or plug-in hybrid vehicle lets through a markedly larger deduction. It is not the only criterion, but it genuinely weighs on the net cost of the vehicle for the company.

We also recall that depreciation is only one aspect of the subject. The annual taxes on the use of vehicles, the possible benefit in kind if the director uses the car privately, and the recovery of VAT form a whole that must be looked at globally, file by file.

The most underestimated risk concerns long-term leasing and finance leases. Many directors think they avoid the cap by not recording the vehicle as an asset. That is inaccurate. Under a long-term lease or finance lease, an equivalent add-back applies to the share of rents corresponding to vehicle depreciation above the cap.

In practice, the leasing company often calculates and states this non-deductible fraction on an annual statement, but it is up to the company to add it back on its tax return. If this adjustment is forgotten, the company deducts too much, and the gap surfaces in the event of an audit.

The second blind spot lies in the confusion between depreciation and annual taxes. The cap under article 39-4 and the taxes on the use of vehicles (now integrated into the CIBS, formerly TVS) are two separate mechanisms. The same vehicle can be both capped on depreciation and liable for the annual taxes: these are two different lines, not to be added together or confused.

A few checks are worth systematising at year-end closing for passenger vehicles.

• Note the exact WLTP CO2 rate on each registration document, not an approximate value or an old NEDC figure.
• Check the vehicle category: a commercial vehicle (category N1, marked VU) escapes the cap, a passenger car (M1) is subject to it.
• Recalculate the add-back each financial year as long as the vehicle is depreciated, not only in the year of acquisition.
• Under a long-term lease or finance lease, request the add-back statement from the leasing company and carry it over onto the tax return.
• Clearly distinguish, in your tracking, the capped depreciation and the annual vehicle taxes.