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VAT Act § 13, para. 2, 2nd indent – car dealer liable for VAT on the sale of replacement cars

The High Court ruled that an automobile dealer’s resale of exchanged cars was not exempt from VAT pursuant to section 13 (1) of the VAT Act. 2, 2nd paragraph. The company had taken the cars in exchange from private individuals in connection with the sale of other cars to them. Prior to the resale, the cars had been temporarily made available to the company’s employees as company cars as part of an in-kind remuneration scheme.

The High Court found that the cars during the entire company’s ownership period actually had to be considered to have been for sale and were included in the company’s inventory. The cars could therefore at no time be considered to have been taken out by the company, whereas the service benefit had been taken out as a service that the cars had been temporarily made available for the individual employees’ private use with a number of restrictions, cf. 2. 

The High Court noted that the cars had to be considered bought and sold as part of the ordinary car dealership business. As a starting point, the company was therefore pursuant to the provision in the VAT Act, section 42, subsection. 6, entitled to a VAT deduction for all the expenses incurred by the company for spare parts, accessories and preparation of the cars. The High Court further noted that the company had not proved that any of the expenses incurred were borne solely as part of the fact that the cars were also made available as company cars.

As the company was therefore entitled to a VAT deduction for its expenses for the cars, and there had thus been no double taxation, the “mixed” use of the cars, which was established by making the individual cars temporarily available to employees as company cars, , did not lead to the sale of the cars being exempt from tax pursuant to the VAT Act, section 13, subsection. 2, 2nd paragraph.

The High Court further found that the practice relied on by the company, including the content of SKAT’s legal guidance, sections DA22.4.3 and DA 22.12.2, did not relate to situations that could be equated with the circumstances of the present case. Therefore, there was no clear and unambiguous practice which meant that the decision of the National Tax Tribunal in the present case had to be regarded as a change in practice.



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