What taxes must you pay when selling a car in Ukraine?

Every car owner has faced a situation when they had to sell their “swallow.” This can be explained by several factors: urgent need for money, moving, or a possible purchase of a new car. Many people in Ukraine think about the need to pay car sales tax. This is a complex issue that worries many motorists. We will tell you more about it in our article. 

Both individuals and legal entities can sell a car. Everyone pays taxes when receiving income from the sale of a car. Different taxation rules apply to individuals and businesses. You need to know them to sell your car without delay

Private individuals - Ukrainian, foreign, or stateless citizens need to know how much tax to pay when selling a car. The main changes in Ukrainian legislation have affected individuals. These measures should aim to de-shadow the income of individuals who are constantly engaged in car sales and do not pay taxes on their income.

Since 2020, no taxes have been levied on selling the first car. But starting from the sale of the second vehicle, the following taxes are imposed on the income of individuals: 

• personal income tax; 
• military duty. 

If a second car sale or exchange transaction is made during the year, you must pay 5% personal income tax and 1.5% military duty. If a third car is sold, the tax amount may increase to 18%, but the military duty on the sale of a car will remain the same. 

It should not be higher than the average vehicle cost on the market when calculating the amount. Such a transaction must be registered with a government agency and notarized. The lawyer will only sign the agreement if he or she is presented with a bank receipt for the car purchase.

The Tax Code of Ukraine has also established certain car sales rules. The decision to sell a vehicle is made at a general meeting of the founders and owners, as the car is an asset on the company's balance sheet. 

After reaching an agreement, the shareholders' meeting appoints a person responsible for selling the car and deregistering it with the Interdistrict Registration and Examination Office. After the sale, the profit is calculated. The taxable amount cannot be lower than the residual book value of the fixed asset. If the price is lower, the tax is paid based on the value at the time of sale.

VAT payers must issue a tax invoice on the day of the vehicle sale. Companies calculate their income tax, which is paid quarterly after filing the relevant tax return. For companies operating under the general taxation system, the tax rate on car sales is 18%. Companies operating under the single tax system pay taxes following the STS rate.

Ukrainian legislation sets out taxes on the purchase and sale of a car. These measures are aimed at car dealers and those who bring cars in. The former buys a car, makes minor repairs, prepares it for sale, and looks for a buyer. The latter bring vehicles from abroad. Sometimes, it is possible to formalize a deal at the border when a car is brought under a specific owner. In this case, the state does not charge taxes. 

However, when the car is brought from abroad, registered, and put up for sale, you will have to pay taxes to the state treasury. It is possible to reduce the amount, but all methods are associated with risks:

• lowering the appraised value. However, an expert who values his reputation will not always agree to this deal. In this case, you will have to contact a dubious company, which is quite risky. 
• registering a car for relatives and friends is not prohibited by law, but not everyone agrees.
• sale by proxy. This option is also not always good. A power of attorney does not mean transferring ownership of a car.

It is better to buy or sell a car through reliable car dealerships. Those wishing to buy a premium car should address this issue with a car center, even if the vehicle is 3-5% more expensive.