Non vat registered company and second hand cars EU trading

[zirinisp]

I would like some advise on a situation that we are facing with UK non-vat registered companies and the Greek Customs. The situation has to do with supply of used car to individuals and businesses in Greece from a UK non-vat registered company.

The UK company purchases the cars from private individuals accross Europe and then sells them to its customers. As the cars are used they are bought vat inclusive and the vat cannot be differentiated (under "Margin Scheme"). The cars are then sold to businesses and private individuals the same way they are purchased inclusive vat (on the invoice only the total value is shown as the vat cannot be broken down). On the invoices it is mentioned that "input tax deduction has not been and will not be reclaimed by me in respect of the goods that are sold on this invoice".

The company has not been registered for VAT in UK as most of the supplies and sales of the goods take place outside UK (advise that was given over the phone from HMCE).

When the cars enter Greece, the customs is charging them with import tax (Greece is one of the few countries in Europe that still have import tax) and VAT. For invoices that show that vat has not been deducted (like the case i mention above), they do not have to pay vat as it has already be paid when the vehicle were purchased new in another EU country.

The problem that we face is the following:

- The Greek customer claims that these companies are not VAT registered. Which is true.

- And according to them if the company is not vat registered it cannot sell a car under the margin scheme.

- Then they use the above two arguments and call all the customers that have purchased cars to pay the VAT and fines for non paying it when they bought the car.

My point of view is the following:

- A non vat registered company cannot buy a car without vat. Except when the car is new or with less than 6000 klm. On all other cases it can only buy cars VAT inclusive.

- It cannot claim back the vat as it is not vat registered.

- On the sales invoice it cannot break down the value of the car and the vat amount.

- When it sells the car, the sale should be vat inclusive or margin scheme equivalent, as vat has been paid on the acquisition. 

- According to the margin scheme if the sale takes place with another vat registered company, then the vat registered company could buy it under the Margin Scheme.


In Greece all companies are vat registered, so non vat registered companies are unknown for the Greek customs. I believe that they are making a mistake as they are not aware of non vat registered companies. If they are not making a mistake then the company made a mistake and should have been registered for VAT. In any case it does not make any sense to pay the vat twice (once when the car was new and now that the customs claims it) within the EU and there should be some sort of solution (like late vat registration).

I would like to hear advise from someone that deals professionally with VAT matters, so i can sort the above problem out.

[Eamon McNicholas]

The situation is very complicated and needs specialist advice.

Eamon Mc Nicholas
Tax Barrister

www.EamonMcNicholas.com

[Liability is excluded. The above is not to be taken nor used as specific advice.]