VAT on the profit margin of the sale of certified used cars can be calculated without taking into account the total sale value

The value-added tax (VAT) on the profit margin of the sale of certified used automobiles can now be calculated without taking into consideration the overall selling value, according to a statement from the Zakat, Tax and Customs Authority. Starting on July 1, 2023, this regulation will be enforced under certain conditions.

According to the authorities, the desire to lower the price of VAT on certified used automobiles is why tax is calculated using the profit margin approach. It was made clear that the profit margin approach only applies to vehicle dealerships and agencies that are registered with the authorities for VAT reasons as well as to car traders who adhere to certain requirements.

The authority emphasised that using the profit margin approach to calculate value-added tax is not required because the tax may be applied to the total amount of the sale that is owed using the method already in use.

The authority verified that in order to calculate VAT using the profit margin approach, a number of requirements must be completed. The two requirements that stand out the most are that the automobile must be present and have been previously used in the Kingdom and that it must be designated as a certified used car by the relevant authorities. Additionally, the vendor must register with the appropriate government for VAT reasons.

The terms and conditions further state that this is applicable to individuals with a licence to transact in automobiles and that the licenced dealer must get the authority's consent in order to be eligible to use the profit margin approach to certified pre-owned vehicles. Instead of imposing VAT on the entire sale price of the automobile, this would charge VAT on the difference between the purchase price and the selling price in terms of the realised profit margin. 

The unified call centre number (19993), which is available 24 hours a day, seven days a week, as well as the Twitter account for "Ask Zakat, Tax and Customs" (@Zatca_Care), [email protected], and instant messaging through the authority's website (zatca.gov.sa), are all ways that consumers can get in touch with the authority with questions.