Norway: VAT on Used Car Sales

The Norwegian Tax Administration (NTA) published a binding advance statement regarding the VAT on used car sales. Company X initiated this process regarding the purchase and sale of used cars on a commission basis. In addition to retail car trade, Company X offers other services, such as insurance and financing, in cooperation with its business partners.

Recognizing the need for a new standard contract for used car sales, Company X took a proactive step and requested an official statement from NTA on the treatment of company turnover related to used car sales under the new contract. 

Tax Authority Assessment

The main question was whether the commission on used car sales is exempt from VAT under articles 6-7 and 3-1 of the Norwegian VAT Act.

The NTA stated that three sales models must be distinguished to determine the applicable rule. The first one is a sale in its own name and for its own account, or ordinary resale; the second one is mediation, which refers to sales in another's name and for another's account; and the third is sales on commission, where the sale is made in its own name, but for another's account.

For sales on commission, there are two equally important parties: the person who owns the car, in this case, the Client, and the intermediary, also known as the commission agent.

Upon reviewing Company X's draft of a new contract, the NTA assessed that under the new agreement, the Client is responsible for complaints about the car and that Company X cannot be considered a commission agent. 

The NTA's assessment concluded that Company X does not sell used cars on commission under the new contract terms and that, therefore, its turnover is not exempt from VAT. However, only the fees paid to Company X are recorded and calculated for VAT purposes.

Conclusion

Apart from providing an important clarification on the VAT rules applicable to this specific case, this assessment also shows how businesses can rely on Tax Authorities' expertise and services to avoid any potential issues relating to the collection and remittance of VAT. 

Furthermore, this statement shows how businesses and government bodies can work together to resolve potential real-life issues that laws cannot explicitly cover.

Source: The Norwegian Tax Administration