Buying a car · 4 min read
Understanding VAT when buying a car
What “VAT reclaimable” means, when you can get it back, and why two equally priced cars can cost different amounts.
The difference that appears in the listing
On cars sold by a business you often find the note “VAT reclaimable”, or a line such as “incl. 19% VAT”. That means the dealer shows the tax separately on the invoice.
Where that note is missing, the car is usually sold under the margin scheme. The dealer then pays tax only on their margin, and you cannot reclaim any input tax.
Who it makes a difference to
For private buyers the two are the same: you pay the final price in the listing and get nothing back.
For businesses entitled to deduct input tax the difference is substantial. On a car shown at €23,800 including 19 per cent tax, €3,800 is input tax — the effective cost is €20,000. A margin-scheme car at the same price really does cost €23,800.
As a business, therefore, never compare the gross prices of two listings without looking at this line.
Buying across a border
When a business buys a car in another EU country, the supply can, under certain conditions, be free of tax; acquisition tax is then accounted for in its own country. Separate rules apply to new vehicles, and those also catch private buyers.
This is an area where a mistake is expensive. Speak to your accountant before a cross-border purchase — this article is no substitute for that advice.