ZATCA has officially announced the implementation date for the profit margin scheme for used cars in Saudi Arabia. Eligible taxpayers engaged in supplying qualified used cars will commence the application of the scheme from July 1, 2023.
- ZATCA further clarified that the ‘profit margin’ method targets car agencies and showrooms registered with ZATCA for VAT purposes and who can practice car trading activities subject to certain conditions.
- However, profit margin method is not mandatory, and businesses can choose to apply VAT on the entire amount due, following the existing method.
- The application of the profit margin method entails calculating VAT based on the difference between the purchase price and the sale price (i.e., the realized profit margin) rather than applying VAT to the full value of the consideration received.
