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Monday, May 27, 2024

Certified used car’s VAT will be calculated on the basis of sales profit margin conditionally

Certified used car’s VAT will be calculated on the basis of sales profit margin conditionally

The Zakat, Tax and Customs Authority announced that it is possible to calculate the value-added tax (VAT) on the profit margin of the sale of certified used cars, without taking into account of the total sale value. This regulation will be implemented conditionally, effective from July 1, 2023.
The authority stated that calculation of tax according to the profit margin method comes as an effort by the authority to reduce the value of VAT on certified used cars. It clarified that the profit margin method targets car agencies and showrooms registered with the authority for VAT purposes and those who engage in car trading activity in accordance with specific conditions.

The authority stressed that the method of calculating the value-added tax on the profit margin is not mandatory, as the tax can be applied to the entire sale amount due in line with the currently applied method.

The authority confirmed that there are certain terms and conditions to be fulfilled for calculating VAT on the basis of profit margin method. Most notable among these conditions is that the car must be classified as a certified used car by the authority, and that the car must be present and previously used in the Kingdom. Also, the seller shall be registered with the authority for VAT purposes. The terms and conditions also include that this is applicable to those licensed to engage in car trading activity, and the licensed dealer must obtain the approval of the authority in order to be considered qualified to use the profit margin method on certified used cars.

Under this, VAT will be imposed on the difference between the purchase price and the selling price in terms of the realized profit margin, instead of being charging VAT on the total car sale value.

The authority called on the consumers, who have any queries, to contact it via the unified call center number (19993), which operates around the clock, seven days a week, or through the “Ask Zakat, Tax and Customs” account on Twitter (@Zatca_Care) or via e-mail (, or through instant conversations via the authority’s website (

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