Car trade tax system

Features of taxation of a car dealership

If a number of requirements are met regarding the amount of profit, the number of employees, and the residual price of fixed assets, a car dealership can choose the most appropriate taxation regime for its operation.
This could be the simplified tax system, UTII, OSNO. For each of these systems, the legislation provides for the payment of certain taxes and concessions. The law does not provide for any derogations in taxation when applying any of these regimes to car dealerships. Any auto center has the right to apply several taxation regimes if its activities cover different areas. It is noteworthy, in turn, for the same reason that the accounting department maintains separate accounting for expenses, income, and input VAT.

https://www.youtube.com/watch?v=ytpressru

Any type of income that goes to the current account of a legal entity is subject to tax. Income from the sale of a car that was on the company’s balance sheet is no exception. In this case, the entire amount received from the sale of the vehicle will be taxed. In this case, there may be more than one tax. It can have several varieties, depending on what type of taxation the company uses.

In the Russian Federation, the most common taxation systems are:

• OSN;
• simplified tax system;
• UTII, which is usually combined with OSN or simplified tax system.

VAT refund when purchasing a car for pensioners

VAT reimbursement for the purchase of an apartment or other real estate, as well as vehicles, is not provided for by the legislation of the Russian Federation. You can return the personal income tax deduction only when purchasing real estate, when you previously paid interest on the mortgage.

It is also possible to receive a social deduction for paying tuition fees, etc. It is impossible to return personal income tax on the purchase of a vehicle; the deduction is provided only when the vehicle is transferred under a purchase and sale transaction.

Sale of a car by a legal entity on OSN

If a company applies the general taxation system, then it must pay a tax of 20% on all income reduced by expenses within one reporting period. If a car is bought and sold by a company in the same company, then tax will be charged only on the difference between the amount of the purchase of the apartment and the sale.

This will be the case if the income from the sale of the car is greater than the costs of purchasing it. If the sale amount is lower, the company will not have to pay tax at all. In addition, the difference between the purchase and sale amounts can be used to reduce the tax base for other income received by the company in the reporting period.

If the sale of the car takes place in another reporting period, then the income from its sale may be reduced by other company expenses. It should be remembered that all income must be confirmed. If there are no such expenses, or they are used to reduce the tax base for other income, then the tax will need to be paid on all the proceeds that the company receives when selling the car.

VAT may be included in the price of the car, but this may affect its price, which will be unattractive to the buyer. It is also possible to deduct VAT as an output, but in this case one condition must be met: the company must not have deductible amounts of input VAT on any purchases in a specific tax period.

VAT refund when purchasing on credit

You may be surprised, but today in Russia the share of cars purchased with borrowed money, i.e. on credit, has already exceeded 50 percent. Is it possible to get a VAT refund if the car was purchased on credit? Having examined this issue in detail, I came to the conclusion: VAT subject to refund from the budget can be reimbursed to the taxpayer due to the use of tax deductions provided for in Chapter 23 of the Tax Code of the Russian Federation. At the same time, tax deductions for taxpayer expenses for the purchase of a car, including on credit, are not provided for by Chapter 23 of the Tax Code of the Russian Federation.

It's sad, you say. And you'll be right! For example, in the West, many countries provide state support for the population when purchasing property of significant value. Today I will not go into details of Western programs. Here's just a small example: if a citizen purchases a new car, then he is entitled to tax benefits in the future. And this is absolutely fair! After all, he bought a car with his hard-earned and honestly declared money, from which, by the way, he paid taxes to the state honestly and on time. And how big money is earned in our country, and what taxes are paid, you know perfectly well even without me. So draw your own conclusions! Here, either we change the world, or the world will change us.

Standard account assignments used in accounting at a car dealership

Inaccuracies, various types of errors, and sometimes serious errors are often found in the reporting of the accounting service. According to the current PBU No. 22 dated June 28, 2010, such an incorrect representation of the facts of economic activity is considered significant if it directly or indirectly affects subsequent economic decisions. As a result, a distorted picture of the financial situation is created.

This Regulation contains a complete description of possible errors in the actions of an accountant and ways to correct them. Therefore, the accountant should take this document into account and be guided by it when correcting errors.

It should be understood that many erroneous actions can lead not only to distortion of further data, but also to penalties from tax authorities (20-40% of the arrears). This has a direct bearing, for example, on incorrect calculations indicated in the submitted declaration.

You can avoid such consequences by making the necessary corrections in a timely manner and submitting an updated declaration, i.e., before the tax authorities discover errors and schedule an on-site audit. Or you need to pay the taxes in full according to the updated version of the declaration and pay a penalty. Then it won't come down to a fine.

L. M. Grigoriev (individual) purchases a new car. When selling vehicles, the accounting department of a car dealership is required to show transactions using standard account assignments:

1. DT 60, CT 51 - payment to the car supplier.
2. DT 41, CT 60 - the cost of the received car.
3. DT 19, KT 60 - display of VAT on the purchased car.
4. DT 68, CT 19 - VAT deduction.
5. DT 62, CT 90-1 - profit from the sale of a car to L. M. Grigoriev.
6. DT 90-2, KT 41 - deregistration of the cost of goods.
7. DT 90-3, KT 68 - display of VAT payable to the budget.

The car dealership sells a car to Russian citizen L.M. Petrov. At the request of the client, the vehicle being sold was retrofitted before the sale. The necessary work was carried out by a third party. Expenses associated with retrofitting were included in the cost of the car prepared for sale.

The accounting department displayed the operations for retrofitting the car as follows:

1. DT 41 (cars given away for retrofitting), KT 41 (cars purchased) - transfer of a car for retrofitting to another organization.
2. DT 60, CT 51 - payment for the services of the organization that carried out the retrofitting of the car.
3. DT 41, CT 60 - existing expenses that appear in connection with retrofitting.
4. DT 19, CT 60 - VAT on retrofitting of the car being sold.
5. DT 68, CT 19 - VAT deduction.
6. DT 41, KT 41 - the price of the car sold to L. M. Petrov.

L.M. Petrov, when purchasing a car, expressed a desire to retrofit it. Installation of additional equipment was carried out by a third party. Accounting related to retrofitting was carried out separately by the accounting department:

1. DT 44, CT 60 - existing expenses that appear in connection with the installation of additional equipment.
2. DT 19, KT 60 - VAT on vehicle retrofitting.
3. DT 60, CT 51 - payment for services for retrofitting another organization.
4. DT 68 (VAT), CT 19 - VAT deduction.
5. DT 62, KT 90-1 - income from completed retrofitting work.
6. DT 90-2, KT 44 - write-off of expenses appearing in connection with retrofitting.
7. DT 90-3, KT 68 (VAT) - VAT payable to the budget.
8. DT 90-9, CT 99 - income.

Sale of a car by a legal entity using the simplified tax system

According to the current legislation, there are two types of such taxation system as the simplified tax system:

• simplified tax system “income”, taxed at a rate of 6%;
• The simplified tax system is “income minus expenses”, taxed at a rate of 15%.

If the company is in the “income” simplified taxation system, then in the event of the sale of a car, the entire amount of proceeds from the sale is subject to taxation. The tax in this case will need to be calculated at a rate of 6%. In this case, it will not matter in which tax period the car was purchased, as well as how much money the company spent on its purchase.

If a company applies the “income minus expenses” tax regime, then in the event of a car sale, tax will be charged on the difference between the income received from the sale and the amount of expenses spent on its acquisition. In this case, as with OCH, purchase expenses and sales income must relate to the same reporting period. The tax is calculated at the rate applied by the company. Typically this is 15%.

To reduce the tax base, other company expenses incurred in a specific reporting period can also be used. But this is only possible if these expenses were not taken into account when reducing income when selling other objects.

Features of tax regimes: what does an entrepreneur need to know when buying a car?

After registration, an individual entrepreneur is not an ordinary individual, but an entity running his own business who:

• opens current accounts;
• pays taxes;
• takes out insurance;
• reports to tax authorities.

If an individual entrepreneur purchased a car for business activities, then it becomes an element of taxation. However, this process has its own characteristics, depending on the form and methods of purchase.

• If during state registration a person chose a simplified taxation system (STS Income minus expenses), then the purchased car can reduce the amount of tax payments.
  This opportunity is valid if the vehicle was purchased for business purposes, which can be documented. After purchase, tax payments and car maintenance costs will be added to the expenses.
• If the entrepreneur is on the general taxation system (OSNO), then it is important to perform the following steps:
  write an order in your name, stating that the vehicle is used exclusively for work and not in everyday life;
• When using a car, issue waybills, which will prove that the entrepreneur owns the car for business purposes.

In fact, choosing OSNO is inconvenient for individual entrepreneurs, since after purchasing a car many questions and tasks arise regarding how to include the cost of a car in expenses.

Registration of a car allows an entrepreneur to use it for his business and document expenses spent on operation in the vehicle maintenance category. This reduces the number of tax objects in which all payments are recorded.

For an individual entrepreneur, vehicle registration occurs in accordance with the general rules provided for individuals. However, there are no serious conditions for the vehicle to be used only for delivery or transportation, so it is possible to drive to perform other main activities.

In this case, all funds that will be spent on gasoline, oil, repairs and other automotive operations can be recorded as service and transportation expenses.

For reporting, the individual entrepreneur must bring supporting documents to the accounting department: receipts for payment for gasoline, use of paid parking, service stations, etc.

If a merchant bought a vehicle as an individual

An individual entrepreneur is an individual who is registered in the manner prescribed by regulations and carries out entrepreneurial activities. According to Art. 212 of the Civil Code, an individual entrepreneur is not a subject of property rights. Thus, the purchase of a vehicle is always for an individual.

The main difference arises when the purpose of using the car is determined. When operating a car for personal purposes, the individual entrepreneur does not report to the tax office the expenses for the vehicle, and on the income received from the sale he pays only 13% of personal income tax. For more information about whether you need to pay personal income tax and in what cases and how to reduce the amount or avoid the contribution, read this material.

The vehicle certificate can contain information that the owner of the car is an individual entrepreneur. For this purpose, the document contains a column “Special notes”.

Sale of a car by a legal entity on UTII

A feature of such a tax regime as UTII is that the company pays a fixed amount of tax, which does not depend in any way on how much revenue it receives. The main condition for this is that the type of activity that the company is engaged in and from which it receives income must fall under UTII. These types of activities include, for example, retail trade.

If a company, in addition to income falling under UTII, also has other income, then it is taxed in accordance with the taxation system chosen by the company. This may be a general system or a simplified one. That is, a company can simultaneously combine two taxation regimes: UTII and OSN or UTII and simplified tax system.

When a company sells a car that was used exclusively in activities falling under UTII, the income received will not be taxed. However, in this case, the company will need to prepare sufficiently significant evidence that the car was used exclusively in activities falling under the imputation. This is necessary in case the company is audited by the tax authorities. Unfortunately, in practice this is almost impossible.

Therefore, in order to avoid problems with the tax authorities, companies often do not classify proceeds from the sale of a car as income on UTII. They calculate the tax on this type of revenue according to the taxation regime in which they operate. That is, either according to the basic system or a simplified one. In this case, the procedure for calculating tax will be carried out according to the same principles as for those applying the specified taxation regimes.

Thus, if a company combines imputation and the main system, then VAT will be required to be paid on the income from the sale of a car. If a company combines imputation and simplification, then VAT is not paid.

Accounting documentation in a car dealership

The rules for maintaining accounting and reporting in a commercial structure are determined by the Regulations approved by Order of the Ministry of Finance No. 34n (as amended on July 8, 2016). When creating accounting, the following required minimum documentation is used.

Since 2013, the organization has the right to develop most samples of primary documentation independently. This means that the usual format of many documents presented in albums of unified forms is not mandatory today. The only exceptions are the forms introduced by authorized bodies in accordance with federal legislation. An example would be receipts and cash documents.

Power of attorney for selling a car

In accordance with current legislation, a company has the right to sell a car it owns without the participation of the company administration or business owners. This can also be done by a trusted person, and notarization of such a document is not required. The main thing is that you will need to take into account all the requirements for the preparation of this document.

The power of attorney clearly states the details of the principal and the executor. In addition, specific actions that a company representative has the right to perform are also indicated. A power of attorney, as a rule, has a limited validity period, which is set depending on the period of the transaction and all registration actions. The document must be certified by the signature of the head of the company, as well as a seal (if used in the company).

Good to remember

• Individual entrepreneurs can use personal property in business and vice versa. There is no need to submit any documents for this.
• Take into account the costs of purchasing property in the simplified tax system “Income minus expenses” only if you can prove that it is useful for your business.
• Not all property maintenance costs can be taken into account. Communal services in an office apartment are not allowed, gasoline is only for business-related trips, mobile communications are only for business calls.
• You don't have to pay tax on property you use in business. To do this, submit a tax application.
• It is more profitable to sell property as an individual, rather than as an entrepreneur. But the tax office makes sure that they pay the correct taxes and do not try to save where they cannot. If you used the property in business, and the tax office has evidence, you will have to pay tax as an entrepreneur. Even if it's not profitable.
• It is more profitable to sell property that was used in business before the closure of the individual entrepreneur.

Deregistration of a car upon sale

When selling a company-owned vehicle, it must be removed from the books. This is accompanied by the preparation of administrative documents, as well as the execution of relevant postings. When deciding to sell a car, the commission issues a write-off act justifying this movement. One of the acts must be sent to the accounting department; it will serve as the basis for completing the necessary entries:

• D 01 K 01 – initial cost written off;
• D 02 K 01 – depreciation written off;
• D 91 K 68 – VAT charged;
• D 91 K 01 – the residual value of the car is written off;
• D 62 K 91 – income received (for calculating income tax on the amount of the sale of the car).

Postings must be completed on the day when the car is transferred to the new owner under the purchase and sale agreement. This date must also coincide with the date specified in the car acceptance certificate, as well as the transfer of funds to the account.

Myth and reality

It turns out that VAT refund when buying a car for personal purposes is a myth, because... an individual does not pay VAT and, accordingly, does not have the right to return it. But legal entities and individual entrepreneurs who are VAT taxpayers can return VAT on the purchase of a car if they use it directly in business activities.

That's all it seems. Don't be afraid of anything, formalize the deal legally and everything will be fine.

Share this post

Related Posts
• Types of loans for car purchases
• Certificate of acceptance and transfer of the vehicle to the purchase and sale agreement
• How a car dealership imposes extras on customers
• Vehicle purchase and sale agreement
• Is it possible to save on transport tax?
• Best time of year to buy a car