Hidden discounts in the used car trade

When used cars or parts are traded in, hidden discounts can no longer be deducted when calculating VAT.

If a car dealer accepts a used car as payment when selling a vehicle and the buyer makes an additional payment in the amount of the difference, the value of the used car is part of the VAT consideration for the vehicle sold. Until now, the crediting of a price above the market value for the used car was considered a hidden discount, which reduced the consideration and therefore also the VAT to be paid.

However, the Federal Fiscal Court has contradicted this approach, which is why the Federal Ministry of Finance has now amended the regulation. The subjective value of the used car, i.e. the value at which the car is credited against the agreed purchase price, is now to be used for the consideration portion of the used car. This means that hidden discounts are no longer deducted when calculating VAT. The same changes apply to the supply of replacement parts and trade-in of old parts.

In principle, these changes must be applied in all open cases. However, the Ministry has granted a generous transitional period until January 1, 2022, during which exchange transactions involving used cars and parts may be treated as before.