Situation:
A company ABC SRL, VAT payer, with CAEN code 4511 (trade with used cars) purchases a used car from another legal entity, not VAT payer.
How will VAT be charged on the sale?
Solution:
If the car in question was purchased with a view to resale, we note that the requirements and conditions for the application of the special second-hand regime are met, if:
- the car is no longer considered new because a number of journeys exceeding 6,000 km were made prior to purchase or the car was delivered 6 months after the date of commissioning.
The mentioned criteria are regulated by Article 266 “Meaning of certain terms and expressions” paragraph (3) “New means of transport referred to in Article 268 paragraph (3)(b) and Article 294 paragraph (2)(b) are those referred to in point (a) and which fulfil the conditions laid down in point (b) respectively:
(b) the conditions to be fulfilled are:
- in the case of a land vehicle, it has not been delivered more than 6 months after the date of entry into service or has not made journeys exceeding 6,000 km;”;
- the condition in Article 312(2)(c) is fulfilled, the car being supplied by a small enterprise which has previously used it as a capital good. The small enterprise as defined by the VAT is defined by article 310 paragraph (1) of the Fiscal Code “(1)The taxable person established in Romania according to article 266 paragraph (2) letter a), whose annual turnover, declared or realized, is lower than the limit of 88.500 euro,……, ” Thus, in the invoice issued, possibly in the sale-purchase contract, the seller must specify that the car has been used as a capital good according to the provisions of article 312 paragraph (2) letter c).
“(2) The reselling taxable person shall apply the special scheme for supplies of second-hand goods, ……. for which there is an obligation to collect the tax, goods which he has acquired within the European Union from one of the following suppliers:
- a) a non-taxable person;
- b) a taxable person, to the extent that the supply made by that taxable person is exempt from tax under Article 292(2)(g);
- c) a small enterprise, in so far as the acquisition relates to capital goods;”
Therefore, if the two conditions are met cumulatively, the reseller applies the special scheme to the sale, collecting VAT only on his profit margin determined as the difference between the sale price and the purchase price in accordance with the provisions of Article 312 “Special schemes for second-hand goods, works of art, collectors’ items and antiques” paragraph (1)(g).
Thus, the profit margin is the difference between the selling price charged by the reselling taxable person and the purchase price, where:
- the selling price is the amount obtained by the reselling taxable person from the purchaser or a third party, including subsidies directly related to this transaction, taxes, payment obligations, duties and other expenses, such as commission, packing, transport and insurance, charged by the reselling taxable person to the purchaser, excluding price reductions;
- the purchase price shall be the total amount obtained, as defined in the definition of the selling price, by the supplier from the taxable person making the resale;”
For the determination of the tax collected on the margin, we take into account the provisions of paragraph 86 of the implementing rules of Article 312(4)(c) concerning the application of the gross margin mark-up procedure:
“(4) For the purpose of applying Article 312 paragraph (13) and (14) of the Tax Code:
(a) the tax base for each supply of goods subject to the special regime shall be the difference between the profit margin realized by the reselling taxable person and the amount of tax related to that margin;
- b) the profit margin is the difference between the sale price and the purchase price of the goods subject to the special regime;
(c) for the purpose of determining the tax collected in respect of each supply, the amount of the tax collected in respect of each supply shall be calculated from the profit margin determined in accordance with point (b) by applying the rounded hundred method.”
If the two conditions mentioned above are not cumulatively met, the reseller is obliged to apply the normal taxation regime by collecting 19% VAT on the negotiated sales price, excluding VAT (VAT taxable amount).
Legal basis:
– Tax Code (approved by Law no.227/2015, published in the Official Gazette no. 688 of 10.09.2015), as amended and supplemented;
– Tax Procedure Code (approved by Law no. 207/2015, published in MO no. 547 of 23.07.2015), as amended and supplemented;
– Methodological Norms for the application of the Tax Code (approved by GOVERNMENT DECISION no.1/2016).