Does a car rental company need to pay VAT when selling a car?

Dear Questioner,

Thanks for your inquiry!

1. According to the UAE VAT law, the sale of a used car by a registered car rental company is subject to VAT at the standard rate of 5%.

This means that if you sell a car that was previously used for rental purposes, you will have to charge VAT on the sale price.

2. Similarly, the sale of a car by a trading company is also subject to VAT at the standard rate of 5%. This applies to both new and used cars.

However, if the trading company is registered for VAT and the car is being sold as part of their regular business activities, they may be able to claim input tax credit for the VAT paid on the purchase of the car.

This means that the VAT they have to pay on the sale may be offset by the VAT they have already paid on the purchase.

Kindly feel free to contact us via phone or email for specific guidance.

Regards,

Dear Questioner,

1. According to the UAE VAT law, the sale of a used car is subject to VAT at the standard rate of 5%. This means that if you are selling a car that was previously used for rental purposes, you will need to charge VAT on the sale price.

2. Similarly, if a company sells a car that was used for business purposes, it will also need to charge VAT on the sale price.

However, if the company is registered for VAT and has already paid VAT on the purchase of the car, they may be able to claim a refund of the VAT paid when they sell the car.

This would depend on the specific circumstances and should be discussed with a tax advisor.

Dear Questioner,

1. Car Rentals and VAT:

When you rent a car, you typically do pay VAT on the rental fee itself. This applies to most car rental companies. Additionally, VAT might be charged on any additional services or fees you choose, like insurance or one-way rentals.

2. Trading Business Cars and VAT:

In the case of a trading business, the VAT treatment depends on how the car was used:

- Used for Business:

If the car was used solely for business activities within the country, the company might be able to recover the VAT paid on the rental, lease, or purchase of the car. This requires proper registration for VAT purposes.

- Not Used for Business:

If the car wasn't used solely for business, then selling it would generally not involve any VAT payment.

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