Don't charge too much VAT on the sale of your passenger car
The rules around deducting VAT on passenger cars and other business assets have undergone a real metamorphosis since 2013. For passenger cars, the VAT deduction must be based on one or more special methods (see our newsletter Informatief Special of 17 January 2013 for more details). One thing you can be sure of is that the deduction cannot exceed 50%. But depending on your private use of the car, it could also be quite a bit less. Fortunately, there’s also something positive – the rules have finally been clarified: when selling your passenger car, from now on you should no longer charge the full rate of VAT.
In principle, VAT should be paid only on a maximum of half of the sale price
If you sell a passenger car after 2013 for which you have deducted VAT at any point, you should charge 21% VAT only on a maximum of half of the sale price. "A maximum of half of the sale price" means:
- If in the past VAT was always deducted from 50% of the value, then VAT is only payable on 50% of the sale price excluding VAT.
- If you’re a sole trader and the car is only partially included in the assets of the business, and therefore VAT has only been deducted from a lower percentage of the value (such as 20%), from now on VAT is payable on a corresponding percentage of the sale price excluding VAT (in our example, 21% VAT should be charged on only 20% of the sale price).
- If, for a company, VAT has been deducted from a lower percentage of the value (such as 20%), from now on VAT is still payable on 50% of the sale price excluding VAT since the car was fully included in the company assets. It may well be advantageous for the company to carry out a review if the five-year review period has not yet ended.
The above system applies regardless of whether you purchased the passenger car before or after 1 January 2013. All that matters is that at some point VAT was deducted on the purchase invoice. At the very least, remember to include the following statement on your sales invoice: "Reduced taxable amount, in application of Decision E.T. 119,650 of 20 October 2011".
21% VAT is still charged on the full sale price in exceptional circumstances
The above system does not apply to passenger cars for which your company has never been entitled to a VAT deduction. That would primarily be the case if your company bought the car from a private individual (which could be you or your partner) or if your company purchased a second-hand car under the margin scheme.