Does VAT In The UAE Affect The Sale Of Used Cars?

The VAT is a new trend in UAE because it’s a phenomenon to develop the economy of the country. VAT is implemented to increase the price of luxury vehicles. There are different audit firm in Dubai that provides online bookkeeping services.

The VAT has one facility that is if you are going to sell a vehicle at the less price then that you have paid already, then there is no VAT.

Introduction about VAT in Dubai

Value added Tax implemented in 2018 in Dubai. It has only a small percentage, which is 5%. That is not too much, so it is not going to impact anyone.  When you buy a car, there is not the only the price of the vehicle, but their also some other expenses like fuel, maintenance, insurance, etc. There is no VAT on the used cars; VAT is for buying a new car, of taking cars at loan.

The VAT on new cars:

When you buy a new vehicle from any dealer or a car company than you have to pay 5% VAT with the actual price. This VAT will be equal to the 5% total price of the Car.

But there is another condition; if you are going to buy a new car directly from a seller, then there is no VAT.  

The VAT on Loan cars:

If you are going to buy a new vehicle from the bank, then the bank will detect 5% VAT from your account. However, there is no tax otherwise from banks.

The VAT on used cars:

If the user is buying a second hand or used the vehicle, then there is no VAT. You are free from VAT.

Tax Calculation:

If you want to calculate the tax, please read this example.

Someone has a car of AED 150,000 and if he repairs the car and that takes near AED 3000. Then a complete profit margin will be 10,000, and the 5% VAT will become AED 350.

FTA awareness:

FTA arranges a workshop to make an awareness of VAT on cars in all the business dealers of UAE. This session designed by Al Aweer autos and the municipal authority of Dubai. The presenters of FTA explained each and everything on the used and new cars. They also developed a new profit margin scheme. They also said to the audience for creating new workshops like this, so that if someone has any question so they can ask.

Importance of VAT:

The VAT is significant because they show that the person has paid his taxes on time. It's proof in the form of a document that they have paid the fee. Tax authorities used them to check each and everything according to the law. The VAT is simple and the best way of the summary of total earnings and the tax paid in different periods.

Summary:

Dubai launched VAT on vehicles in 2018, and it’s only 5%, which is the lowest in the whole world. There are different conditions of the VAT on cars. If you are buying a new car, then you have to pay the VAT. But if you are purchasing a used car, then there is no VAT. Same as the case, if you are buying a car on a vehicle then you must have to 5% VAT which will be deducted by the bank.

The VAT on used cars is nothing. It has a significant impact. Because people will save their money, buy just paying more taxes value-added payments that will make the UAE used things useable because there are a lot of used items that are free from work. There are different audit firm in Dubai or online bookkeeping services.