The State Duma moved quickly to pass amendments in the second and third readings that remove the double taxation of value added tax on the resale of used cars and motorcycles between dealerships. This development was reported by TASS and reflects a shift in how VAT is treated in dealer-to-dealer transactions.
Earlier in the previous year, a corresponding bill advanced in the Federation Council with the purpose of eliminating the practice of charging VAT twice in deals that involve used vehicles changing hands between dealers. The reform is framed as a step toward simplifying tax rules in the automotive market and reducing the cost burden on resales within the dealer network.
Under the current regime, VAT is embedded in the cost of a brand new vehicle upon its initial sale. When a dealer acquires a used car from a private seller, the dealer faces the challenge that the subsequent sale to another business entity entails VAT on the full price. In such cases, the purchasing entity can only deduct VAT from its own profits, creating a scenario where tax is effectively levied twice during the same chain of custody. This chain of VAT has been cited by industry observers as a drag on resale pricing and a distortion in the market for used vehicles. Citation: TASS.
The new law specifies that it will take effect one month after official publication, and not before the first day of the next VAT reporting period. It will apply to automobile and motorcycle sales that occur from the date the law becomes enforceable, ensuring a uniform treatment for transactions within the dealer ecosystem moving forward. Observers note that the transitional provisions aim to minimize disruption to ongoing trades while aligning tax practices with broader reforms in the tax code. Citation: TASS.
Earlier coverage noted a separate proposal from ROAD regarding penalties for mileage manipulation, suggesting fines of up to one million rubles. This context highlights ongoing regulatory focus on the integrity and transparency of the vehicle market, including compliance with tax rules and fair business practices across the sector. Citation: ROAD.