In an effort to reduce the value-added tax (VAT) on certified used cars, the Zakat, Tax and Customs Authority in Saudi Arabia has introduced a new method for calculating VAT based on the profit margin of the sale. This method will be implemented conditionally from July 1, 2023. This article outlines the key details of this regulation, including the specific conditions that need to be met, and provides information on how consumers can seek clarification regarding this new approach.
The Zakat, Tax and Customs Authority in Saudi Arabia has recently announced changes in the calculation of VAT for certified used cars. Under the new regulation, VAT will be determined based on the profit margin of the sale, rather than the total sale value. This method aims to lower the VAT amount imposed on certified used cars.
To be eligible for VAT calculation based on the profit margin method, car agencies and showrooms registered with the authority for VAT purposes must meet specific conditions. These conditions include being engaged in car trading activity and obtaining approval from the authority. Furthermore, the car must be classified as a certified used car by the authority and must have been previously used within the Kingdom. Sellers must also be registered with the authority for VAT purposes.
Instead of applying VAT to the entire sale amount, VAT will now be imposed on the difference between the purchase price and the selling price, in terms of the realized profit margin. This change aims to provide a fairer and more accurate assessment of the VAT amount for certified used cars.
It is important to note that the profit margin method of calculating VAT is not mandatory. The current method, which applies VAT to the total sale value, can still be used. However, car dealers and agencies who wish to utilize the profit margin method must fulfill the specified conditions and obtain the necessary approval from the authority.
For consumers with any queries or concerns regarding this new VAT calculation method, the Zakat, Tax and Customs Authority offers several channels of communication. They can contact the authority's unified call center number (19993), which operates 24/7, or reach out via the "Ask Zakat, Tax and Customs" Twitter account (@Zatca_Care), email ([email protected]), or through instant conversations on the authority's website (zatca.gov.sa).
