If a dealer accepts a used vehicle in payment when selling a vehicle and the buyer makes an additional payment in the amount of the difference, this constitutes a Exchange with cash surrender before. The amount of the acquisition costs for a new company vehicle and also the amount of VAT are based on the respective actually agreed price. This also applies to the trade-in of a used vehicle. Conclusion: A hidden discount is excluded.
In addition to the payment, the trader's remuneration also includes the subjective (and not the fair market value) of the vehicle that he has taken in payment. This means that the use of an „arm's length“ market price is not permitted. The subjective value is calculated from the individually agreed sales price for the new vehicle minus the additional payment that the buyer has to make. This is the value that the dealer is prepared to pay for the used vehicle.
The BMF has adopted this view of the BFH in the VAT application decree. As the subjective value of a used vehicle is to be taken into account and not any fair market value that may deviate from this, the trade-in of a used vehicle can, in principle, be based on the subjective value. no hidden discount with tax effect.
Special features of the application of differential taxation: If the vehicle dealer accepts a used vehicle in payment from a customer who is not allowed to declare VAT, he can apply the margin scheme. In the case of differential taxation, the actual value of the used item must also be used as the purchase price. This is the value that is used to determine the consideration for the purchase of the new item. actually is taken as a basis.
The trade-in of used vehicles in the motor vehicle industry must be handled accordingly. This means that the subjective value. The amount by which the sales price exceeds the purchase price is therefore to be used as the assessment basis for VAT. The VAT included in the difference must be deducted. Incidental costs incurred by the trader after the purchase of the item are not part of the purchase price and therefore do not reduce the taxable amount. This applies, for example, to repair costs that are not included in the purchase price.
Practical example:
A car dealer purchases a car from a private individual for €5,000. The private individual is not allowed to declare VAT, meaning that input tax cannot be deducted. The car dealer makes use of the option to apply the margin scheme for the sale of the trade-in vehicle. Repairs were necessary before the sale of the trade-in vehicle, for which the dealer spent €400 plus 19% VAT = €76.
In order to achieve a faster sale of the traded-in vehicle, the car dealer reduces the price of the traded-in vehicle to €4,800, resulting in a loss of €200 compared to the purchase price. The consequence of this is that a negative difference arises when calculating the VAT. The assessment basis for a negative Difference of € 0. This means that this difference cannot be taken into account in later tax periods either.
Result: The car dealer does not pay VAT on the sale of the trade-in vehicle. He deducts the repair costs as operating expenses. He claims the VAT shown for this as input tax.