Depreciation of Company Vehicles: The Complete Guide to 2025 Limits
Depreciation of a company vehicle is one of the most strategic tax tools for a business. However, the rules—and especially the limits—change regularly, and a mistake in calculating deductible depreciation can quickly lead to a costly tax assessment. In 2025, the stakes are even higher: vehicle taxation is aligning with environmental goals, offering greater incentives for “clean” vehicles and stricter restrictions on internal combustion engines.
This guide provides you with the figures, rules, and best practices for 2025, so you can maximize your tax deductions with confidence.
Summary:
Understanding the Depreciation of a Company Vehicle
Depreciation allows the purchase cost of a vehicle to be spread out over its useful life, which is generally 5 years for a new vehicle. This expense is then deducted from the company’s taxable income, thereby reducing its corporate tax liability. However, please note: part of this depreciation may not be deductible, depending on the type of vehicle and its CO₂ emissions rate.
Calculation Methods
There are two methods:
- Straight-line depreciation: The cost of the vehicle is allocated equally over each year of its useful life.
- Declining balance depreciation: Expenses are higher in the early years, which allows for a greater reduction in taxable income at the beginning of the period. However, this method is limited to certain types of vehicles (commercial vehicles, public transportation vehicles) and excludes standard passenger cars.
Deductible depreciation limits for 2025
The deduction limits vary depending on the vehicle's CO₂ emissions (WLTP standard). Here is the schedule applicable in 2025:
| CO₂ emissions (WLTP) | Deduction limit |
|---|---|
| Less than 20 g/km (electric and hydrogen vehicles) | 30.000€ |
| Between 20 and 59 g/km (plug-in hybrids) | 20.300€ |
| Between 60 and 130 g/km | 18.300€ |
| More than 130 g/km | 9.900€ |
Note: These limits apply to the purchase price (including tax) for vehicles purchased in 2025. Commercial vehicles are not subject to these limits.
The specific case of electric and plug-in hybrid vehicles
100% electric vehicles
Electric vehicles (EVs) benefit from a favorable deduction cap of €30,000. In addition, if the battery is billed separately, its depreciation is not subject to the cap, allowing for further tax optimization. In 2025, businesses can also recover100% of the VAT on electricity used to charge their vehicles, whether at charging stations installed on their premises or at public charging stations.
Plug-in hybrid vehicles
Plug-in hybrids (PHEVs) with emissions between 20 and 59 g/km are subject to a cap of €20,300. However, tax rules for these vehicles will become stricter in 2025: regional registration tax exemptions will end, weight-based penalties will be applied, and purchase incentives will be phased out. Companies must therefore accurately assess the actual electric range of these vehicles to optimize their TCO.
How does accurate fleet tracking make filing your reports easier?
For accurate accounting—particularly when calculating benefits in kind—precise, automated mileage tracking is essential. Fleet management tools provide far more reliable tracking than a simple paper logbook, reducing the risk of errors and adjustments. They also allow you to:
- Centralize data(mileage, fuel consumption, maintenance).
- Automatedepreciation and tax recapture calculations.
- Optimize TCO by identifying the most expensive or underutilized vehicles.
Practical examples of depreciation calculations
Example 1: Electric vehicle (purchase price: €42,000)
- Deductible base: €30,000 (2025 cap).
- Depreciation period: 5 years (straight-line method).
- Annual amortization payment: €30,000 ÷ 5 = €6,000 per year.
- Tax savings: €6,000 × corporate income tax rate (25%) = €1,500 per year.
Example 2: Internal combustion engine vehicle (purchase price: €25,000, emissions > 130 g/km)
- Deductible base: €9,900 (2025 cap).
- Depreciation period: 5 years (straight-line method).
- Annual amortization payment: €9,900 ÷ 5 = €1,980 per year.
- Tax recapture: (€25,000 – €9,900) = €15,100 non-deductible.
Pitfalls to Avoid
- Forgetting to check the CO₂ emissions rate: the limits are based on the WLTP standard, not the NEDC standard (the old method).
- Overlooking VAT: For commercial or electric vehicles, VAT may be recoverable, which reduces the depreciable base.
- Ignoring legislative changes: In 2025, new taxes (TAI, weight-based surcharges) and the end of certain tax exemptions for hybrid vehicles could affect the total cost of ownership (TCO).
Toward a Greener and More Cost-Effective Fleet
The choice of powertrain for your vehicles has a direct tax impact due to depreciation limits. “Clean” vehicles (electric, hydrogen, plug-in hybrids) have a clear advantage, while the costs associated with internal combustion engines are rising.
Mastering these rules is essential for optimizing the total cost of ownership (TCO) of your fleet and avoiding unpleasant surprises when filing your reports. By 2025, fleet electrification will no longer be an option, but a strategic necessity for balancing economic performance with regulatory compliance.