Is it possible to get tax deductions when buying a car on credit or when selling it?

Russian tax legislation allows you to obtain property tax deductions in various situations.

For example, almost everyone has heard about the deduction that can be obtained when purchasing an apartment or residential building. Also, most drivers know that you can receive a property deduction in the amount of 250,000 rubles if you sell a car. This deduction is discussed in more detail in the article “Car Sales Tax.”

At the same time, the essence of the tax deduction in any case comes down to the fact that a person is exempt from personal income tax (personal income tax in the amount of 13%), which he paid previously or must pay in the future.

So, well-known deductions are provided when buying an apartment and when selling a car. And in this regard, many drivers have a question about whether it is possible to return taxes when buying a car ? This will be discussed below.

For example, Andrey bought a new car at a car dealership worth 1,000,000 rubles. He wants to receive a deduction of 13% of the purchase price, that is, 130,000 rubles. Let's see if this is possible.

Legislation

You can find the answer in the Tax Code of the Russian Federation:

1. In paragraph 1 of Art. 220 of the Tax Code of the Russian Federation contains a list of property for which you can receive a deduction.
2. If we rely on subparagraph 3 of paragraph 1 of Article 220 of the Tax Code and letter of the Ministry of Finance of the Russian Federation dated May 21, 2010 No. 03-04-05/9-277, there is no information about vehicles in this list.
3. Letter No. 03-07-14/45360 of the Ministry of Finance of the Russian Federation dated July 17, 2017 regulates the procedure for VAT refund to legal entities.

In 2015, deputies of the LDPR party prepared a bill to include transport in the list of property for which income tax can be refunded. But at the same time a certain list of criteria was compiled:

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1. The car must be new.
2. The car was produced by a domestic plant or it is a Russian-assembled foreign car.
3. The amount of payments cannot exceed 500 thousand rubles.
4. Reimbursement is a one-time event.

A list of brands and models purchased by a citizen for the first time at a car dealership was compiled. Thus, the creators of the bill wanted to stimulate consumers to buy domestic cars for the development of the Russian automobile industry.

However, the amendment has not yet been adopted. If it is reviewed and approved in 2021, it means that payments will begin to be made from this period, but for now there are no changes in the law.

For reference! According to the law, you cannot get a deduction for buying a car, you can only get it for selling it.

Normative base

The laws of the Russian Federation determine that every citizen, when purchasing property, can receive 2 types of deductions: property and social.

The Tax Code of the Russian Federation lists a number of types of property for the purchase of which a citizen is entitled to a tax deduction. The car is not on this list. Therefore, no matter how much money a person spends on purchasing a car, there is no point in waiting for a personal income tax discount, because the purchase of a vehicle does not serve as the basis for obtaining the right to apply for a property deduction.

1. Article 220 of the Tax Code of the Russian Federation provides for obtaining the right to a tax deduction when carrying out transactions only with real estate. Transport is not one of these.
2. The issue of tax deduction for vehicles has not been considered at the legislative level.
3. The cost of a car is usually no more than 600,000 rubles. Only a very small part of the population buys cars costing more than 1 million rubles.
4. A tax deduction is only due to a person who regularly pays taxes to the state.

You should not assume that a tax deduction is an integral part of the funds spent on the purchase of any property and that after completing the purchase and signing the contract, you will be able to get these funds back. A tax deduction assumes that if certain requirements are met, not the entire amount of the transaction will be subject to personal income tax, but only some part of it.

Social tax benefits are discussed in paragraph 1 of Article 219 of the Tax Code of the Russian Federation. These include funds paid for charity, treatment, training, insurance of future pensions of citizens of the Russian Federation.

It is clear that buying and selling a car cannot be classified in this category. Therefore, car owners cannot claim social tax benefits when selling or buying a vehicle.

Tax deduction from buying a car: is it there or not in Russia?

Many taxpayers appreciated the possibility of returning money that was withheld from salaries in the form of 13% when purchasing real estate or making large expenses (charity).

A car is more likely to be considered a luxury. The Tax Code says that only the seller of the car can return 13%. After selling the vehicle, he must submit a declaration to the inspectorate by April 30 and pay personal income tax by July 15.

Individual entrepreneurs or other legal entities can return VAT for the purchase of a car.

For reference! If the tax service refuses to return funds to a legal entity, it must be sent a written notice of the reasons for the refusal.

Calculation example

As with other forms of deduction, a citizen can return the full amount of the tax paid. However, this rule applies only if the total amount does not exceed 65,000 rubles.

The amount of compensation depends on the price of the car. To calculate, you need to determine the 13 percent share that you had to pay in tax. To do this, just use a calculator. The cost of the vehicle should be divided by 100 and multiplied by 13.

It is important to know! If the price of the car was 500 thousand rubles, then 13% of this amount is 65 thousand. This is the maximum amount of deduction that they will be able to receive upon purchase if changes to the law are approved.

Is it possible to return income tax for buying a car on credit?

The Tax Code provides for a deduction when taking property on credit. When it comes to a car loan or auction, the law is also adamant.

Attention! According to the law, personal income tax refund for the purchase of a vehicle is not allowed. This applies to cash purchases and leasing.

Perhaps in the near future there will be amendments to the bill that will allow the taxpayer to return his 13% for the purchase of a vehicle, but now the refund is only available to the seller.

What is a tax deduction

A tax deduction involves the return of part of the funds previously paid as payment for personal income tax (NDFL), due to personal expenses incurred. However, the procedure is allowed only in specific situations specified in the legislation.

Refunds occur in the following cases (paragraphs 219, 220 of the Tax Code):

• acquisition of expensive real estate;
• renovation of premises or construction of a residential building;
• repayment of interest when paying off a loan received under a mortgage program of any bank;
• payment for treatment;
• repayment of tuition fees (subject to the educational organization having a license);
• transfer of funds to charity;
• the taxpayer undergoing requalification, etc.

The listed cases involve expenses in vital areas. It is for this reason that tax privileges are provided for them.

In addition, it is important to understand that benefits in the tax system apply only to those citizens whose income is subject to tax at a rate of 13%. Simply put, officially working citizens, as well as persons who receive income in another way but regularly pay the state contribution, can count on a refund of part of the funds spent.

Do I need to file a tax return?

The buyer cannot return the 13 percent upon purchasing the vehicle. But, despite this, he needs to carefully monitor all documentation that relates to the car. This is necessary so that in the event of a subsequent sale, the citizen can return the property tax.

The declaration is submitted only when selling a car, and when purchasing such a document is not sent to the inspectorate. But legal entities are required to report to the tax authorities on almost all of their income.

So, an income tax refund when buying a car is impossible, but the seller can issue one. He will need the following documents:

• passport;
• statement;
• declaration 3-NDFL;
• vehicle purchase and sale agreement;
• paper confirming payment;
• documents on a previously completed transaction.

The entire package is submitted to inspection by April 30 of the current year.

Attention! A refund is possible if the seller owned the car for no more than 3 years. The deduction amount should not exceed 250 thousand rubles.

Under what conditions can you get a deduction?

Conditions for receiving a deduction when selling a car

In order to receive a deduction when selling a car, the following conditions must be met:

• the owner of the car is a taxpayer of the Russian Federation;
• there is a PTS proving its ownership;
• a document confirming the transaction indicating the income has been preserved.

If, after purchasing the car, the owner made some changes to the car that resulted in improved performance, then you can include this in the list of property expenses. To receive a deduction, you will need to document these costs (checks, receipts).

There is no legally established list of such changes. But improvements in consumer qualities include:

• increased comfort: air conditioning, expensive upholstery, electric window lifts;
• improved functionality: racks, fastenings;
• change in appearance: wheel rims, xenon headlights;
• TV in the salon, navigator.

Tax refund when buying a car

So, an individual who acts as a buyer of a vehicle cannot return property tax for it. But the car seller and legal entities, individual entrepreneurs or LLCs can return the tax deduction.

A category of people has been defined for whom there are relaxations in the law in this regard. These include: Chernobyl survivors, pensioners, disabled people, war veterans, etc.

For individuals

The personal income tax refund procedure for an ordinary taxpayer begins with an income declaration to the Federal Tax Service. For citizens living in the Russian Federation for more than 183 days, the taxable amount is 13%, and for those whose period of residence is less - 30%.

The declaration must be submitted to the inspectorate before April 30; you can fill it out yourself by hand, print it, or contact a special organization. It must be handed over to the inspector whose station is located at the taxpayer’s place of residence.

When a citizen has paid the tax, he can begin collecting documents to return his own funds, for this he will need:

• a certificate confirming the period of ownership of the vehicle;
• purchase and sale agreement for a car;
• a copy of the car's passport with a note about the new owner;
• papers proving the fact of payment for the transaction;
• statement;
• Form 3-NDFL.

With this package of documents, the citizen goes to the tax office at his place of registration. Next, you need to wait for notification of consent or refusal to return the money.

If suddenly for some reason the documents for the car were lost and it is impossible to restore them, then it will not be possible to issue a deduction. Moreover, the former owner faces a fine for loss of documents.

For a legal entity

To receive a VAT refund, you need to go through several stages. It is necessary to determine the amount of the refund (to do this, calculate the tax on the sale of goods for a certain period), then add the amount paid for services or products. If the total is more than what you are going to return, then the return will probably be approved.

If the inspector’s decision was positive and the return of funds is approved, then the next day a notification of permission is sent to the treasury, where it is reviewed, and within 5 business days the funds are returned to the applicant. And after another 5 days, the Federal Tax Service notifies the legal entity about this.

To obtain VAT you will need the following documents:

• application to the Federal Tax Service;
• declaration;
• letter requesting a refund;
• contract for the sale of transport;
• receipts or checks confirming payment for the vehicle.

After a thorough check, the tax office agrees to the refund, but there are cases when a notification is received with a refusal.

The amount of tax deduction for the treatment of a child

The maximum total amount of social deductions is 120,000 rubles. After applying the benefit, up to 13% of all expenses, but not more than 15,600 rubles, is returned to the taxpayer’s account, that is, 13% of 120,000 rubles.

Example:

In 2021, you gave your child braces and paid 140,000 rubles for dental treatment. Since this is more than the maximum permissible deduction amount, you will be able to return personal income tax only on the amount of 120,000 rubles, that is, 15,600 rubles.

Example:

In 2021, you paid 30,000 rubles for the treatment of your child, 40,000 rubles for medicines and 60,000 rubles for your training at a driving school. The total cost was 130,000 rubles. But since the maximum amount of social deductions, including the child’s treatment and your education, is 120,000 rubles, 15,600 rubles will be returned to your account, that is, 13% of 120,000 rubles.

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Simple and expensive treatment

There are two types of treatment: simple and expensive. The 120,000 limit only applies to simple treatments and medications associated with those treatments. The deduction for expensive items has no upper limit and is provided for the entire amount of expenses. This condition also applies to the tax deduction for the treatment of a child.

To determine which type was used, request a Certificate of Payment for Medical Services from the clinic. The treatment code will be indicated there: “1” for simple and “2” for expensive. The full list of medical services and medicines for which benefits are provided is presented in Decree of the Government of the Russian Federation of April 8, 2021 No. 458.

IMPORTANT! Each parent has the right to a social tax deduction for the treatment of a child. And if expenses for the year exceeded 120,000 rubles, both parents can submit declarations, regardless of who was the payer. One parent receives a deduction within the established limit, and the second - for the amount in excess.

We recommend obtaining separate Certificates of payment for medical services from the clinic - personally addressed to each parent, indicating the amount of expenses for the child. This is an optional requirement, but a personal certificate will eliminate unnecessary questions from the Federal Tax Service inspector.

If this cannot be done, for example, all payments were made from the account of one of the parents, the payer provides the original Certificate and a copy of the child’s Birth Certificate, and the second parent - a copy of the Certificate, a copy of the child’s Birth Certificate and a copy of the Marriage Certificate.

If the parents are divorced, then each can return a tax deduction for the child’s treatment up to the amount they paid.

Example:

Sasha’s treatment in 2021 cost 210,000 rubles. Both his mother and father work for him and pay personal income tax. In 2022, Sasha’s parents are preparing 3-NDFL declarations and deducting: mom 120,000 rubles, dad – 90,000 rubles.

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Deduction for medicines for a child

A tax deduction for the treatment of children in 2021 can be obtained when paying for any medications. The main thing is that the drugs are prescribed by the attending physician. Take two copies of the prescription from the pediatrician: one for the pharmacy, and the second attach to the package of documents for the personal income tax refund for the child’s treatment.

The requirements for the prescription are determined by order of the Ministry of Health and the Ministry of Taxes dated July 25, 2001 No. 289/BG-3-04/256 - it must comply with form No. 107-1/u.

After paragraph 3, paragraph 1 of Art. 219 of the Tax Code was amended by Federal Law No. 147-FZ; the stamp “For the tax authorities of the Russian Federation, Taxpayer INN” on the prescription is not required. Reason: letter of the Federal Tax Service of Russia dated February 10, 2020 No. BS-3-11/ [email protected]

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Tips and tricks

The main thing for both cases is to correctly collect and prepare the documentation for delivery. A legal entity can buy a car and justify the time spent. But an ordinary taxpayer will have to independently calculate the cost, duration of transport, collect and submit documents to receive 13%.

In this case, there is also an “injured” party - the buyer who will not return his money. But do not despair: perhaps the bill will be adopted.

Dear readers! To solve your problem right now, get a free consultation

— contact the lawyer on duty in the online chat on the right or call: +7 (499) 938 6124 — Moscow and region.
+7 (812) 425 6761 — St. Petersburg and region. 8 (800) 350 8362 - Other regions of the Russian Federation You will not need to waste your time and nerves - an experienced lawyer will solve all your problems! Or describe the situation in the form below:

Questionable method

Quite often, in order to avoid the need to pay personal income tax to the treasury, former owners of vehicles enter a deliberately reduced price into the contract. Nevertheless, regulatory organizations closely monitor such transactions, and if they suddenly see that you sold a foreign car for less than 250,000, then it is unlikely that they will be convinced of the veracity of the terms of the agreement.

A home-grown schemer caught in the act will face severe punishment. So, he will be forced to:

• pay a hefty fine imposed on tax evaders;
• pay personal income tax in full;
• compensate legal costs.

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Is there a deduction when selling a car?

So, is a citizen entitled to a reduction in the personal income tax base if he buys a car? Unfortunately no. There is no such discount in any of the cases provided for by law.

It concerns only real estate - and a car, even the most expensive one, already belongs to movable property. Consequently, the buyer cannot count on anything in this case.

But the seller is directly affected by the benefits discussed just above. In cases where his car is older than three years, and has been his property all these years, he has the right not to pay personal income tax.

In this case, the declaration is not submitted at all. But even if the car is newer or was purchased less than three years ago, the seller still has the right to count on a tax discount.

Who is entitled to benefits?

In addition to deductions, there are also situations in which a citizen will generally be exempt from having to pay personal income tax on certain types of income. These cases are already regulated by Art. 217 of the same normative act. Their list is quite extensive.

In particular, this includes:

• benefits from the state (with the exception of payments for sick leave and care for a sick child);
• pensions;
• compensations that were paid in cases established by law;
• payments to volunteers engaged in charitable activities;
• alimony payments;
• scholarships;
• profit of peasant farms in the first five years of operation;
• income of residents from the sale of real estate and shares in it, as well as property that people owned for more than 3 years (with the exception of securities and income of individual entrepreneurs from the sale of what they used in business).

The list here is not complete, but you need to pay special attention to the last point when dealing with a car.