A new procedure is being introduced for the sale of used cars in Azerbaijan, APA reports.
This is reflected in a proposed amendment to the Tax Code.
According to the draft, it is proposed that, for a period of three years, value-added tax (VAT) be calculated on the trade margin when official car dealers sell used vehicles that are no more than five years old and have been purchased exclusively through non-cash payments.
It was noted that one of the main issues raised during meetings with dealer networks concerned the high VAT burden on transactions involving the purchase and sale of used cars that are no more than five years old.
Currently, in accordance with the internal policies applied by official dealers, the sale of such vehicles is formalized not as commission-based trade but as the repurchase of the vehicle by the dealer and its subsequent resale. As a result, VAT on these transactions is calculated on the full sale price, meaning that the tax burden effectively applies to the vehicle's total value rather than only to the trade margin earned by the dealer.
This approach creates a heavier tax burden for official dealers compared to commission-based trade, which has the same economic nature, contributing to higher prices in the used car market, reducing the competitiveness of official sales channels, and encouraging informal transactions.
Taking these factors into account, it is considered appropriate to calculate VAT only on the trade margin when official dealer networks purchase and sell used cars that are no more than five years old. In addition to being consistent with the economic nature of taxation, this approach will contribute to the development of the official car market, increased transparency, and higher tax revenues in the medium and long term.
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