Can Used Cars Be Used to Deduct VAT?
2 Answers
If an enterprise purchases a used car and obtains a special VAT invoice, it can use the invoice to deduct the input VAT amount. If the enterprise purchases a used car and obtains an ordinary invoice, it cannot deduct the input VAT amount. If the enterprise purchases a used car from a small-scale VAT taxpayer, there is no issue of deduction. When an enterprise purchases a used car and obtains a special VAT invoice: It can use the invoice to deduct the input VAT amount, meaning the seller purchased the car after January 1, 2009, and had already deducted the input VAT at the time of purchase. Therefore, when selling, the seller must issue a special VAT invoice and calculate the output VAT amount at a 17% tax rate. When an enterprise purchases a used car and obtains an ordinary invoice: It cannot deduct the input VAT amount because the seller purchased the car before January 1, 2009, and did not deduct the input VAT at that time. When selling, the seller calculates the payable VAT amount at a tax-inclusive price of 1.032% using a simplified method.
From our experience running a small business, there are ways to deduct VAT with used vehicles. Your company must be a general VAT taxpayer. For example, if I buy a used truck for deliveries, I can deduct the input tax, but the prerequisite is that the seller issues a special VAT invoice with clear tax amount details. The purchased vehicle must be for business use, not for the boss's personal use, as the tax authorities strictly check this. The operation is simple—just enter the system and file taxes. However, individuals buying used cars cannot deduct VAT at all; this is purely a corporate benefit. My friend tried to save money by buying from a roadside dealership with incomplete invoices and was fined heavily for forcibly deducting. I suggest business owners use formal channels to ensure proper invoices and evaluate the car price to avoid exceeding limits. The used car market is complex—compliance comes first, saving on taxes is minor compared to avoiding risks.
