It is proposed to change the method of calculating VAT when selling used cars by official dealers.
According to the proposed amendment to the Tax Code, for a period of three years, VAT on the resale of used cars that are not older than five years from the date of manufacture and purchased by dealers only in a non-cash manner will be calculated not from the full value of the car, but only from the trade margin.
Modern.az reports that economist expert Khalid Karimli, speaking to Oxu.Az about the issue, stated that the change will not cover the entire market.
According to him, the change may, in a certain sense, lead to a decrease in the price of those cars:
"Because the VAT burden on those individuals will decrease, and they will have the opportunity to offer discounts up to the amount of VAT. They will be able to concede a certain part, if not entirely. Currently, the calculation is done as follows: let's say a dealer buys a car for 20,000 manats and sells it for 22,000 manats. Previously, VAT was calculated from 22,000 manats. In this case, a tax of 3,356 manats was incurred. In such a situation, they would have to sell a car bought for 20,000 manats for 25-26,000 manats. They couldn't do this because cars were sold for cash in the market. That's why they sold them non-cash.
The main issue here is that they were already evading tax. One of the main goals of the change is to create opportunities for transparency. How will it be now? If they buy a car for 20,000 manats and sell it for 22,000 manats, they will pay VAT on 2,000 manats. The VAT on this amount is 305 manats. Let me clarify the figure for your publication: previously they had to pay 3,356 manats, but now they will pay 305 manats in tax. See the difference between 3,356 manats and 305 manats.
One of the main issues here is to create opportunities for the formalization of the market. Previously, they saw that they would not be able to sell officially under these conditions, so they bought and sold outside of official channels. Reducing the tax burden allows official dealers to work in a non-cash, transfer-based manner."
X.Karimli added that the mentioned step itself is very positive:
"It will both increase official car sales, expand non-cash settlements, and increase transparency. But there is one point here: if they didn't pay tax before, and now there will be a necessity to pay approximately 300 manats in tax, we might not feel the impact on prices that much. This is one of the main points.
Previously, the tax was higher, but if they didn't pay that tax, if they concealed transactions, if they bought and sold for cash, not much might change in terms of prices. This step increases non-cash settlements and reduces tax evasion. The main goal here is to reduce tax evasion. Because transactions in the used car market were mainly conducted in cash. Now they want to increase the volume of non-cash transactions.
They were not interested in switching to non-cash settlements because a large tax burden was created. Dealers also bought and sold for cash, evading tax. This change is intended to reduce such instances."
