The European Commission published a communication on 5 March 2025 outlining plans to decarbonise corporate fleets, which account for 60% of new car registrations in the EU. The communication mentioned that fleet operators can negotiate better deals and benefit from incentives like tax depreciation, VAT deductions, and benefit-in-kind taxation.
There is currently no definition in EU legislation of what entails a corporate fleet. For this Communication, all vehicles registered by a legal entity (as opposed to a physical person) are considered corporate vehicles. Thus, corporate fleets could be divided into five broad categories, covering cars, vans and heavy-duty vehicles (trucks, buses and coaches).
The communication acknowledges that Member States are supporting the company car market with more than EUR 40 billion annually through subsidies or fiscal treatment (reductions or exemptions from registration tax, annual vehicle tax, etc.), with most of that amount used for conventional vehicles. While the situation is varied across Member States, with state support ranging up to substantive amounts such as EUR 16 billion per year in Italy, some element of support is prevalent in most Member States.
Changing these fiscal regimes can have a quick and decisive role in the transition to zero-emissions vehicles in corporate fleets, as the fiscal treatment of different vehicles is one of the main drivers influencing operators’ choices. It can potentially offer the possible advantage of having lower public budgetary implications as compared to direct purchase subsidies, as this could entail a more targeted use of existing fiscal provisions in favour of zero-emission vehicles.
Action should be taken to make systems more favourable to zero-emission options by either reducing comparative benefits for conventional vehicles or improving the treatment of zero-emission vehicles.
As detailed in the abovementioned example, the benefits of targeted changes to the fiscal treatment of conventional corporate vehicles are highly visible in Belgium. This can also be achieved in the field of VAT by modifying the VAT Directive to reduce the right to deduct input VAT for conventional vehicles.
When revising such measures, it is essential to include criteria to safeguard supply chain resilience and sustainability, such as for example rules of origin, circularity and sustainability criteria, as described in the Automotive Action Plan.
From 2035 onwards, new cars and vans will be allowed for registration in the EU only if they are zero-emission; for heavy-duty vehicles, the increasingly stringent targets culminate in a 90% CO2 emissions reduction from 2040 onwards, while all new urban buses will have to be zero-emission as from 2035. These measures should now be supplemented by appropriate stimulus to the demand for zero-emission vehicles, whereby support for corporate vehicles plays a key role.
The plan for the decarbonisation of corporate fleets is a response to an initiative introduced with the objective of supporting the European Union’s 2035 zero-emission target and aiding Member States in increasing the uptake of legislative proposals, which are expected to be adopted by the European Commission by the end of the year. No standard definition of corporate fleets exists in EU legislation. However, for purposes of this plan, corporate fleets have been classified as all vehicles registered by legal entities rather than private individuals.
The Commission emphasises strengthening supply chain resilience and sustainability through measures like rules of origin and sustainability standards, as mentioned in the Automotive Action Plan. It calls on authorities to reform company car incentives to promote zero-emission vehicles, extend these measures to corporate fleets, and use road usage revenues to improve public charging and refuelling infrastructure.
Lastly, the communication outlines the environmental and economic benefits of increasing zero-emission vehicles in corporate fleets, including lower emissions and improved competitiveness. The Commission calls on national, regional, and local authorities to accelerate the transition to zero-emission vehicles. This includes revising taxation policies to make these vehicles more appealing.
By the close of 2025, the Commission will introduce legislative proposals to support this shift, aligning with the European Union’s broader climate goals while ensuring a fair and equitable transition for all.
