WRITTEN QUESTION P-0964/01

by Michl Ebner (PPE-DE) to the Commission

(20 March 2001)

Subject: Taxation of used cars purchased within the EU

Article 36(10) of Decree Law No 41 of 23 February 1995 provides that in the context of intra-Community trade, motor vehicles are considered to be used goods if deemed such by Article 38(4) of Decree Law No 331 of 30 August 1993 (i.e. if they were registered more than six months previously and have been driven more than 6 000 kilometres). Can the Commission therefore state whether such used cars are subject to VAT on the profit margin, regardless of whether they were originally taxed in their EU country of origin under the VAT margin scheme or the ordinary VAT scheme?

Answer given by Mr Bolkestein on behalf of the Commission

(10 May 2001)

The VAT arrangements applicable to used cars can be either the normal VAT arrangements or the special arrangements applicable to second-hand goods, works of art, collectors' items and antiques (the margin scheme), as provided for in Article 26b of the 6th VAT Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes Common system of value added tax: uniform basis of assessment(1).

The margin scheme can be used by a taxable dealer in the following special circumstances:

- Where the vehicle was supplied to him by a non-taxable person, or

- Where the vehicle was supplied to him by a taxable person whose supplies are exempt from VAT because he engages in an exempt activity, or

- Where the vehicle was supplied to him by a taxable person whose supplies are exempt from VAT in accordance with the special scheme for small undertakings, or

- Where the vehicle was supplied by another taxable person applying the margin scheme in respect of that vehicle.

If the margin scheme is applied, the amount on which VAT is charged is the profit margin made on the deal, less the amount of VAT relating to the profit margin.

In each of the circumstances outlined above, the taxable dealer would, in the absence of the margin scheme, not be able to deduct any VAT on the vehicle being sold by him, and he would be obliged to charge VAT on the full consideration he would be entitled to receive from the customer less the amount of VAT relating to the consideration.

However, even where the vehicle to be sold by a taxable dealer qualifies for the margin scheme to be applied to it, he may always opt to apply the normal VAT rules.

If the conditions for applying the margin scheme are not met, it is the normal VAT arrangements which apply to supplies of used cars.

The taxable dealer who supplies a used car must therefore decide on a case-by-case basis whether it is the normal VAT rules that apply or whether the margin scheme could apply.

The Commission can therefore advise the Honourable Member that it is not true to state that all used motor vehicles sold in the Community which have been in service for more than six months and have travelled more than 6000 kilometres are subject to VAT on the profit margin.

(1) OJ L 145, 13.6.1977, Directive as last amended by Council Directive 2001/41/EC of 19 January 2001 (OJ L 22, 24.1.2001).