Selling a Car: Do You Need to Pay Tax for the First Sale Within a Year
Selling your own car does not always mean you have to pay taxes or report to the government. Tax legislation provides a benefit for citizens who dispose of only one passenger vehicle within a year. At the same time, the second and each subsequent transaction entail tax obligations, and in some cases — the need to pay an increased tax rate. That is why it is worth knowing the rules before selling a car to avoid unforeseen expenses.
When the sale of a car is not taxed
In Ukraine, the taxation procedure for transactions involving the sale or exchange of vehicles is defined by Article 173 of the Tax Code of Ukraine.
If an individual sells or exchanges one passenger car, motorcycle, or moped during a calendar year, the income from such a transaction is not taxed.
Moreover, if the person has not received other income subject to mandatory declaration, there is no need to submit an annual declaration of property status and income.
What taxes must be paid on a repeated sale
If during the same year an individual sells or exchanges a second passenger car, motorcycle, or moped, the income from such a transaction is subject to personal income tax at a rate of 5%.
In the case of selling a third and each subsequent vehicle within the year, the personal income tax rate is 18%.
In addition, income from such transactions is also subject to a military tax at a rate of 5%.
How income from the sale of a vehicle is determined
For taxation purposes, income from the sale or exchange of a passenger car, motorcycle, or moped is determined based on the price stated in the purchase-sale agreement (or exchange agreement).
At the same time, this price cannot be lower than the average market value of the vehicle or its appraised market value — depending on which of these indicators the taxpayer chooses.
What to remember
Thus, an individual has the right to sell or exchange a passenger car, motorcycle, or moped once a year without paying personal income tax and without submitting an annual declaration if there are no other incomes subject to declaration. At the same time, the second and each subsequent transaction involving the disposal of such vehicles is subject to taxation according to the requirements of the Tax Code of Ukraine.
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