Saudi Arabia Introduces New VAT Calculation Method for Secondhand Car Sales
The secondhand car business in Saudi Arabia can now anticipate significant relief as the government introduces a new taxation method that reduces the value-added tax (VAT) on the sale of used vehicles. The Kingdom’s Zakat, Tax, and Customs Authority (ZATCA) recently unveiled a new option for calculating VAT based on the profit margin of qualified used cars, rather than the sale price, as reported by the Saudi Press Agency.
This new initiative specifically caters to individuals involved in the car trading business, including authorized agencies and registered car showrooms operating under the authority’s VAT regulations, subject to specific criteria. ZATCA has emphasized certain conditions for employing the profit margin method, including the requirement for the car to be classified as a “qualified used car” by the administration and to have been previously used within the country.
In addition, sellers must be registered with the authority for VAT purposes and possess a license for car trading activities. Eligible traders must also obtain approval from the authority to utilize the profit margin method for qualified used cars. It is important to note that the profit margin method is not mandatory, and tax can still be applied to the full amount based on the current approach.
To address any inquiries regarding the calculation method of the profit margin for qualified used cars, individuals can contact the authority’s unified contact center, which operates 24/7, for assistance and guidance.
In April, ZATCA also announced that taxpayers subject to VAT exceeding SR150 million ($39.9 million) during the years 2021 or 2022 are required to integrate their e-invoicing systems with the Fatoora platform. This move aims to enhance transparency and streamline the invoicing process for larger taxpayers, contributing to more efficient and accurate VAT compliance.
The introduction of this new VAT calculation method for secondhand cars in Saudi Arabia is expected to have a positive impact on the secondhand car market. By basing the VAT on the profit margin, rather than the sale price, traders may experience reduced tax burdens, providing them with increased flexibility and potentially boosting sales within the industry.
The government’s efforts to introduce tax reforms and streamline processes in the automotive sector align with Saudi Vision 2030, which aims to diversify the country’s economy and reduce its reliance on oil revenue. The move is expected to stimulate growth in the secondhand car market, encourage entrepreneurship, and attract investment into the automotive industry.
The Zakat, Tax, and Customs Authority’s ongoing commitment to introducing progressive policies and facilitating ease of doing business is commendable. By implementing measures that support various sectors, including the secondhand car business, the authority plays a crucial role in promoting economic development and enhancing the overall business environment in Saudi Arabia.
As the secondhand car market in Saudi Arabia adapts to this new VAT calculation method, stakeholders in the industry can anticipate a more streamlined and efficient process, potentially leading to increased transactions and growth. The government’s proactive approach to addressing the needs of businesses further solidifies its commitment to fostering a dynamic and thriving economy.
In conclusion, the introduction of a new VAT calculation method based on the profit margin for qualified used cars in Saudi Arabia’s secondhand car business is expected to provide significant relief to traders. By reducing the tax burden, this initiative aims to stimulate growth, attract investment, and contribute to the broader goals of Saudi Vision 2030. The Zakat, Tax, and Customs Authority’s commitment to streamlining processes and supporting businesses demonstrates its dedication to creating a conducive business environment in the country.
