The Cabinet of Ministers supported the abolition of double VAT on the resale of used cars Russian News EN

Vedomosti: the Cabinet supported the idea of ​​eliminating double VAT on the resale of used cars

The Russian Cabinet of Ministers has backed amendments to the Tax Code, which would abolish VAT on the resale of used cars and motorcycles by car dealers. This is stated in a letter from Igor Boytsov, director of the automotive industry and railway engineering department of the Ministry of Industry and Trade. It was sent to the Association of Russian Automobile Dealers on March 10, they write.Vedomosti“.

As noted, draft amendments to the Tax Code were prepared by Senators Andrey Kutepov and Murat Khapsirokov. The adoption of the proposed idea “will lead to an increase in VAT revenue for the federal budget”, Boytsov added. This measure is expected to whitewash up to half of the secondary market and bring in 34 billion rubles in taxes.

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Now, primary VAT is included in the cost of a new car sold for the first time. If the buyer is an individual, when selling this car to a car dealer, VAT is not paid. If a car dealer (i.e. a legal person) sells a second-hand car purchased from another private individual, VAT is only paid on the dealer’s margin (approximately 10%). But when he sells the car to a legal person, VAT is charged on the total cost of the car. This is secondary taxation for the same car, which is proposed to be abolished. At the same time, a legal entity can return VAT only from its margin.

As a result, when a dealer buys a used car from another legal entity, he then adds at least 20% VAT when selling, just to get the cost of the purchase. Taking into account the commercial margin, the final price of a resold car is 20 to 30% higher than the average market price.

On March 7, Russian President Vladimir Putin after a meeting with members of the government educated exempt domestic and inbound tourist travel within the country from payment of VAT. The benefit will be effective retroactively from January 1, 2023 and will last until June 30, 2027.

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