Buying abroad as a business: net price and VAT ID

For used cars, VAT within the EU distinguishes between two kinds of buyer. A private individual who buys in another member state pays the selling country's VAT as it is contained in the price and takes the car home; no further VAT is due at home. A business buying for its operations, on the other hand, can receive what is called an intra-Community supply: the dealer sells VAT-exempt, and the business accounts for the acquisition in its own country.

Three things have to come together. The buyer is a business and acts as one, with a valid VAT identification number from a member state other than the dealer's. The car actually reaches that other member state, and this can be proven. And the dealer sells it under the normal VAT rules, not the margin scheme. If any one of the three is missing, the business pays the gross price too.

Two boundaries first. For a business in Switzerland or Liechtenstein, buying in the EU is not an intra-Community supply but an export from the EU followed by an import — the guide on reclaiming VAT on export covers that. And vehicles that still count as new for VAT purposes follow rules of their own that affect private buyers too; this guide deals with used cars.

Most used cars a dealer buys from private individuals are resold under the margin scheme. The dealer pays VAT only on his margin, shows no VAT on the invoice and refers to the special scheme instead. He cannot sell such a car to a business as a VAT-exempt intra-Community supply, because there is no separately stated VAT that could fall away. The business pays the final price and cannot deduct input VAT; in return, no further VAT is due on the acquisition at home.

VAT-qualifying cars, sold under the normal rules, are mainly those the dealer himself bought from a business with VAT shown: former company, lease and fleet cars, demonstrators, young used cars from the brand network. On these he generally shows VAT separately, and only these can he sell net to a business abroad. The question “VAT-qualifying or margin scheme?” therefore belongs in the first conversation, before any haggling, because it turns the comparison of two offers upside down.

On Carvexia, dealers can mark a listing as “VAT reclaimable”, and search results can be filtered by it. Some also state a net price; it appears below the price as the dealer's own figure, and Carvexia does not calculate it. Whether the dealer will actually sell the car net to a business abroad is a separate matter — settle that with him, ideally in writing.

The VAT identification number is not a business's ordinary tax number but a separate number with a country prefix, issued for cross-border trade within the EU. Not every business has one, and in some member states it has to be specifically enabled for intra-Community transactions. The tax administration of your own country is responsible for it.

The dealer checks the number before selling net, and he is wise to: if it is invalid, he owes the VAT himself. The check runs through the EU's VAT Information Exchange System, VIES for short. It states for each number whether it is valid and, depending on the member state, also shows the company's name and address. Some tax administrations additionally offer a qualified query that confirms name and address as well. A dealer who prints the result and files it is doing nothing unusual.

For you, that means: check your own number in VIES before the first conversation. The name and address on the invoice must match the number exactly, and the business named there is the one that buys, pays and has the car collected. A company number combined with a payment from the owner's private account does not add up, and it will make any careful dealer invoice gross.

For the dealer, the exemption depends on paperwork. If the car demonstrably arrives in another member state, all is well; if the proof is missing, his tax administration claims the VAT from him, whatever you may have promised. That is why a careful dealer asks for more paper than buyers expect, and why he prefers to sell gross when something is missing.

Proof is hardest when the buyer collects and drives the car himself. Then there is no carrier's consignment note, and the dealer needs a written confirmation from the buyer that the car has arrived in the destination country — in Germany this is called a Gelangensbestätigung, an entry certificate — often together with further evidence. Many dealers therefore hold back a deposit equal to the VAT on self-collection and release it once the confirmation and, where required, proof of registration in the destination country are in. These documents are typical:

Net does not mean tax-free. When your business buys within the Community, it declares the acquisition in its own VAT return and owes VAT there at your own country's rate on the purchase price. This is called an intra-Community acquisition. The dealer reports the supply with your number to his tax administration, and that information is exchanged between member states — so an acquisition missing from your return will be noticed.

If the business is entitled to deduct input VAT, it deducts the same amount in the same return, and on balance nothing remains. That is the real advantage: the selling country's VAT is never paid out in the first place. How much is deductible, however, depends on the country and the vehicle — several countries restrict input VAT deduction on passenger cars or where there is private use. Where deduction is restricted, part of the acquisition VAT stays with the business.

Businesses without full input VAT deduction, such as small businesses under a special scheme or companies with exempt turnover, should clarify beforehand what such an acquisition means for them; special rules apply, and a net purchase is not automatically cheaper. Separately, any charges a country ties to registration remain: they are not VAT, and no net price changes them. The binding answer comes from your own tax administration and your tax adviser.

The invoice is made out to the business, with full name, address and VAT ID, plus the dealer's VAT ID and a note that this is a VAT-exempt intra-Community supply. A missing item is not a cosmetic flaw; it is often the reason your own tax administration asks questions later. Ask for a draft invoice before paying and check it line by line.

Payment goes from the business's account to the dealer's account. A payment from a private account or from a third party breaks the chain the dealer needs for his proof: invoice, payment and collection should all point to the same company. Any agreed deposit belongs in the contract, with the amount, the documents that trigger its release and the repayment deadline — not in an email.

Collection is by someone acting for the business: the owner, a managing director with a register extract, or an employee with the company's written authorisation. What such an authorisation should cover is described in the guide on buying and collecting by proxy. The car is then registered in your own country in the business's name. For the dealer, that registration is often the final proof that the car arrived; for you, it is the start of the file every company vehicle needs anyway.