Selling a company car with VAT: how to handle it correctly

When you sell a company car as a self-employed professional or through your company, handling the VAT correctly is a crucial step to avoid overpaying the tax authorities. Mistakes are easily made and can cost you unnecessary money. Whether you sell the car to a colleague, a private individual, or a professional buyer, the rules are different each time. In this article, we explain the VAT rules in simple terms and show how a free valuation immediately tells you where you stand.

Do you have to charge VAT when selling your company car?

In principle, as a VAT-registered entrepreneur, you must charge VAT on the sale of goods that belong to your business assets. This also applies to your company car. But in practice, it is more nuanced. It depends on two factors:

• Did you originally purchase the car with VAT? If you deducted the VAT in full or in part at the time of purchase, you owe VAT on the selling price when you sell it.
• Who are you selling to? Are you selling to a private individual or to a VAT-registered buyer? This determines the rate and the mandatory details on the invoice.

Are you selling a car that you once bought from a private individual and for which you did not deduct VAT? Then you can often benefit from the special scheme, which means you owe less VAT.

Difference between a sole proprietorship and a company

As a sole proprietor, the car is usually a mixed-use asset: you use it both privately and for business. When you sell this car, VAT is calculated on the business portion. In a company, the car is fully owned by the business. The entire selling price is then subject to VAT, unless you can demonstrate that the car was used exclusively for non-economic activities. In practice, VAT is almost always charged.

Selling to a private individual: using the VAT tolerance wisely

If you sell your company car to a private individual, you may not show the VAT separately on the sales document. You charge a total price, including VAT. The tax authorities accept that you calculate VAT on the profit margin if you bought the car without a full right to deduct. This is called the special scheme. In practice, this can mean you only have to remit a limited amount of VAT, while the buyer cannot recover any VAT. That makes the sale more attractive.

Selling to a dealer or professional buyer

If you sell to a VAT-registered dealer or a company car buyer, you always owe VAT on the selling price. The buyer will usually be able to deduct this VAT in full or in part. You must show the VAT correctly on the invoice: the standard rate of 21% or, in some cases, the reduced rate of 12% for vans that meet certain conditions. Note: when selling to a professional buyer, the sale becomes smoother because the buyer handles the formalities and you often get a quick and correct settlement.

The special scheme: VAT on the profit margin

The special scheme is a regulation for the resale of second-hand goods, including cars. Instead of charging VAT on the full selling price, you may calculate VAT on your profit margin: the difference between your purchase price and selling price. The condition is that you bought the car without VAT deduction. This scheme is often beneficial for sole proprietors and companies that could not deduct the car. The VAT amount is then calculated as follows: (selling price, purchase price) × 21/121. Note: you must correctly state the application of this scheme on the invoice.

Mandatory details on your sales invoice

A correct invoice is essential to avoid problems with the VAT administration. When selling a company car, you must include at least:

• Your VAT number and that of the buyer (if VAT-registered)
• Date of sale
• Make, model, chassis number and mileage
• The total selling price and the VAT rate
• If applying the special scheme: the statement "Special scheme, profit margin arrangement"

A professional buyer often prepares this invoice for you, so you avoid administrative errors.

Intra-community sale: selling your car abroad

If you sell your company car to a VAT-registered buyer in another EU country, you can apply the intra-community rules. You then do not charge Belgian VAT and state "VAT reverse-charged" on the invoice. You report the supply in your VAT listing. The buyer pays the VAT in their own country. This option can be interesting if your car is popular abroad, but note: you must be able to provide a valid VAT number of the buyer.

Calculation example: VAT on the sale of a van for €15,000

Suppose, as a sole proprietor, you sell your van with 35% business use for €15,000 to a private individual. You once bought the car from a garage with VAT, but only deducted 35% of the VAT. Because you have mixed use, VAT on the sale is calculated proportionally. But if you sell the car under the special scheme and your profit margin is, for example, €3,000, you pay 21% VAT on €3,000 × 35% business use = €220.50 VAT. Without this scheme, you would have to remit 21% on the full €15,000 × 35% = €1,102.50 VAT. A significant difference, therefore.

Why March is an ideal time to sell your company car

Many entrepreneurs get their accounting in order in the first quarter and review which assets they can replace. In March, demand from professional buyers peaks because buyers want to make an investment before the end of the financial year. If you sell your car in March, you still have control over the VAT return for that quarter and the sale amount can be processed immediately in your next VAT return. That gives you liquidity and prevents you from having to pre-finance the VAT for a long time. So plan your sale strategically.