Do Individuals Need to Pay Taxes When Buying or Selling Used Cars?
1 Answers
If the transfer price of a used car is lower than its original value, no value-added tax (VAT) or personal income tax is required. If the transfer price exceeds the original value, a 2% VAT rate must be paid, along with urban maintenance and construction tax and education surcharges. Additionally, the income obtained from the transfer of a used car by an individual should be calculated as income from property transfer and subject to personal income tax. Key Considerations When Purchasing a Used Car: Ensure the vehicle title is legitimate. Verify the embossed number, engine number, and registration date on the title, and check for any signs of alteration to avoid potential transaction pitfalls. Check for any traffic violation records. Before transferring ownership of a used car, confirm whether the vehicle has any outstanding traffic violations and whether it is within the validity period of compulsory traffic insurance. Only vehicles with no violations and valid insurance can proceed with the transfer process. Generally, vehicles with outstanding violations cannot be transferred until the violations are resolved. Verify the existence of the vehicle purchase tax payment receipt. When transferring ownership of a used car, always check the original tax receipt. Some vehicles may not have paid the purchase tax, and after the transfer, the new owner may be required to settle any unpaid or exempted taxes.
