Baku:A new procedure is being proposed for the sale of used cars in Azerbaijan, as reported by APA. The proposed amendment to the Tax Code suggests a change in how value-added tax (VAT) is calculated for transactions involving used vehicles.

According to Azeri-Press news agency, the draft amendment proposes that for a period of three years, VAT should be calculated on the trade margin rather than the full sale price. This change would apply to official car dealers selling used vehicles that are no more than five years old, provided that these vehicles have been purchased exclusively through non-cash payments.

Currently, the sale of such vehicles is treated as a repurchase by the dealer and subsequent resale, resulting in VAT being calculated on the full sale price. This creates a heavier tax burden compared to commission-based trade, which discourages official sales channels and promotes informal transactions. The proposed change aims to alleviate this tax burden by taxing only the trade margin, thereby making the official car market more competitive and transparent.

The new VAT calculation method is expected to align better with the economic nature of taxation and contribute positively to the development of the official car market, increasing transparency and tax revenues over time.