Can a company deduct VAT when purchasing a used car?
2 Answers
Companies can deduct VAT when purchasing used cars. Below are the relevant details about tax deductions for vehicle purchases: Type of taxpayer: If the enterprise is a general taxpayer, it can use the obtained vehicle to deduct input VAT, and the used car purchase price can be included in expenses to deduct corporate income tax. If the enterprise is a small-scale taxpayer, the purchase price or depreciation of the vehicle can be included in expenses to offset income tax. Special VAT invoice: When a company purchases a used car and obtains a special VAT invoice, it can deduct the input VAT accordingly. That is, if the seller purchased the car after January 1, 2009, and had already deducted the input VAT at the time of purchase, then the seller should issue a special VAT invoice when selling, with the output VAT calculated at a 13% rate. Ordinary invoice: If a company obtains an ordinary invoice, it cannot deduct input VAT because the seller purchased the car before January 1, 2009, when input VAT was not deductible. The payable VAT is calculated as (tax-inclusive price / 1.03) * 2%, which is a simple method.
I've been running my company for over a decade, and buying used cars is a common practice. Can companies deduct VAT when purchasing used vehicles? Generally, yes, but certain conditions must be met. The most crucial factor is that the seller must be a business taxpayer capable of issuing a special VAT invoice, and the buyer must also be a taxpayer using the vehicle for business purposes. For example, when we bought a used truck from a logistics company, they provided an invoice, and we deducted the input tax when filing taxes, saving on tax expenses. Avoid buying used cars from individuals as they can't issue formal invoices, wasting the deduction opportunity. Always keep contracts and invoices properly filed—they're useful during tax audits. Additionally, considering that used vehicles depreciate quickly, calculate how much you can save through deductions rather than focusing solely on short-term savings while neglecting the vehicle's condition. Before purchasing, consult peers for advice or check online tax guidelines to ensure a smooth process.
