It is a common problem: You bought a car in Germany and exported it to other EU countries or countries outside the European Union (third country). The car dealer kept the sales tax (VAT) as a deposit and promised to pay it back after export to the country of destination. When exporting abroad, there is often no VAT liability. There is then a so-called VAT-free intra-Community delivery, which is often noted on the invoice from the car dealership (Section 4 No. 1 Letter b UStG in conjunction with Section 6 a UStG). However, the car buyer must prove that the purchased car was actually taken abroad. Therefore, the VAT is often withheld by the car dealer as a deposit. The tax liability is then subsequently eliminated through the proof of the export of the car to another EU country. Then the sales tax, previously declared as a deposit, has to be paid back to the buyer by the car dealer.
There are four different constellations, whereby the seller must always be an entrepreneur: The car can be exported to other EU countries, it can be exported to a third country outside the EU, the buyer can be an entrepreneur and he can be a private individual.
We are aware of numerous cases in which the German dealer does not pay back the deposit to the foreign buyer without justification and without giving reasons. In addition to the mere unwillingness to refund, it is also possible that the buyer does not provide all the necessary documents.
When is the sales tax deposited as a deposit?
If the tax liability (VAT liability) in the case of car export is expected to be omitted, the car dealership will retain the VAT as a deposit until the export is documented in writing. When exporting to other EU countries, there is no VAT liability in Germany if the buyer can prove the export. If the export is not carried out, the car dealership remains obliged to pay sales tax. Therefore, the retention is for security. The legal basis is Section 6a of the Sales Tax Act.
Car export to other EU countries
The sale of a car for export to an EU member state is ultimately VAT-free if the buyer is an entrepreneur or a legal entity (Section 6a (1) sentence 1 no. 2 a) and b) UStG). When a private individual buys a car, however, the obligation to pay sales tax does not apply if a new car is purchased (see Section 6a (1) no. 2 c) UStG). In the case of a used car, the sales tax liability remains. A used vehicle sold to a private individual is subject to VAT.
Car export to a third country outside the EU
When exporting the car to a third country outside the EU, however, it does not matter whether the buyer is an entrepreneur or a private individual. The vehicle must be proven to have left the EU. There is no obligation to pay sales tax. If the export is proven, the deposit must always be refunded.
When does the VAT deposit have to be refunded?
The car dealer has to reimburse the buyer for the deposit if the VAT liability does not apply to the export. For this purpose, the export abroad must be proven.
What documents does the buyer need to present to the car dealer?
Which evidence the buyer has to provide in the form of documents depends on whether the car is exported to another EU country or a third country. Sections 17a and 17c of the UStDV contain detailed regulations on this. The essential and most important requirements are summarized here:
Car sale within the EU
- Verification of the identity of the purchaser by means of an identity card or the extract from the company’s commercial register
- Submission of a valid sales tax identification number (VAT ID number) for buyers who are entrepreneurs
- Confirmation of the export of the car to the country of destination by means of suitable documents, e.g. delivery note, invoice, proof of dispatch or official confirmation from an authority, so-called confirmation of arrival
Car sale to a third country outside the EU
- Proof of the identity of the buyer by means of an identity card or extract from the commercial register
- Export confirmation from the EU border customs office (if no ATLAS export)
- For ATLAS export: Submission of the exit note
Recovery of the deposit in case of dispute
In the event of a dispute, we offer to reclaim the VAT wrongly withheld by the German retailer. If the trader is already in default, for example if he has previously received repayment requests, he will have to pay the legal fees.
