Truck sales and VAT

Service-Tax

People running a business often sell their assets, ranging from machines to cars. A common problem for companies that are active VAT payers is to determine the appropriate tax rate for the sale of a given fixed asset. What about VAT when selling a truck? This issue will be discussed below.

When is the sale of a truck exempt from VAT?

As it results from the legal regulations contained in Art. 43 (1) (2) of the Value Added Tax Act, the supply of second-hand goods is exempt from tax, provided that the delivering goods did not have the right to reduce the amount of tax due by the amount of input tax.

In line with the above guidelines, if the truck:

  • was used by the taxpayer for a minimum period of 6 months, and
  • upon its purchase, the entrepreneur was not entitled to deduct VAT

- then, when making a sale, the taxpayer may apply VAT exemption. In such a situation, in the field concerning the rate, in the sales invoice, the abbreviation "ex." Should be entered, which proves the use of the exemption.

It is worth noting that the taxpayer is entitled to an exemption in this respect when both of the above conditions are met simultaneously.

When is the sale of a truck subject to VAT?

Similarly to the information contained in the first point, in a situation where an active VAT payer who wanted to sell a truck was entitled to deduct VAT on its purchase or the car was used for a period of less than 6 months, then its sale should be taxed at the basic VAT rate - 23% .

Selling a truck in practice

Example 1.

An entrepreneur who is an active VAT taxpayer purchased a truck based on an invoice (he made a deduction of VAT). After a year of use, he decided to sell it. What rate of VAT should he apply?

Due to the fact that when purchasing the car, the entrepreneur was entitled to deduct VAT, the sale transaction should be taxed at the basic rate - 23% VAT. The fact that the car has been used for more than 6 months is irrelevant here.

Example 2.

An entrepreneur who is an active VAT taxpayer purchased a car on the basis of a purchase and sale agreement. After 5 months of use, he decided to sell it. What tax rate will be appropriate?

Since the useful life is less than 6 months, and thus the car does not meet the definition of used goods, sales should be taxed at 23% VAT. It is irrelevant here that the buyer was not entitled to deduct VAT when purchasing it.

Example 3.

At the time of purchasing the truck, the entrepreneur was not an active VAT payer. The purchase was documented by an invoice. Currently, wishing to sell a car after 3 years of use, the entrepreneur is an active VAT payer. What VAT rate should this type of transaction be taxed at?

Despite the purchase of a truck on the basis of an invoice, the entrepreneur was not entitled to deduct VAT, i.e. one of the conditions for applying the exemption was met. The sale takes place after 3 years of use, so a car meets the definition of a second-hand product. To sum up, the sale benefits from the exemption as both conditions for its application have been met.

Example 4.

An entrepreneur who is an active VAT taxpayer decided to enter a lorry, which he used to privately, into the fixed assets register of his business. The vehicle was purchased 2 years ago on the basis of an invoice. Three years after the transfer of the fixed assets, he decided to sell it. How should this transaction be taxed?

When purchasing the truck, the taxpayer was not entitled to deduct VAT, i.e. one of the two conditions entitling to the exemption was met. A car also meets the definition of a second-hand product, as the taxpayer's period of use was at least six months after acquiring the right to dispose of these goods as an owner. In conclusion, both conditions for the application of the exemption are met. So the taxpayer uses the "return" rate on the invoice.