VAT and margin cars: everything you need to know

September 7, 2022

21 percent

When you buy a new car, you always pay 21% VAT. In the case of a used car, things are different. A used car is either a VAT car or a margin car. A VAT car means that the VAT must be paid by the next buyer. This can be advantageous for business buyers, as they can reclaim the VAT from the tax authorities. As a private customer, this is not possible. If, as a business buyer, you later decide to resell the car, you are required to sell the car as a VAT car. Reclaiming the VAT may also be done again by the next customer, provided this is also a business customer.

Margin Car

A margin car is a car on which the VAT has already been paid. Consider a customer who trades in a car at a car dealer. As a buyer, you do not have to pay the VAT and BPM in that case. As a buyer, you then only pay VAT on the profit margin of the car. With this form of VAT payment, it is not possible to reclaim the tax. A margin car can in almost no case turn into a VAT car. The only construction in which this is possible is when a car company sells a margin car to a business customer allowing the car dealer to waive the application of the margin scheme. This margin sales amount is then converted to a VAT sales amount. In that case, the business customer can still reclaim the VAT.

Used car

So if you buy a car from an authorized car dealer you pay VAT, but if you buy a used car from a private individual you do not pay VAT. VAT is included in the price at a car dealer. Do pay attention when you buy a used car. Within the automotive industry, it is emphasized that used car sites must display honest and clear prices. Yet, there are always people and/or companies who don’t take this honesty and clarity so closely. So pay close attention to whether the price of the occasion is correct, or if VAT needs to be added. This way you protect yourself from a hefty setback.

So if you are a business buyer we recommend that you purchase a VAT car. This saves you money down the line, due to the fact that you can reclaim the amount.