Selling a car is a no-brainer… until it comes to taxes, deeds, contracts and the intricacies hidden between the lines. Selling a car quickly, profitably and without hassle can be a real pain in the ass. Especially if you have no idea whether to have the car bought by a car dealer or try your luck directly. What about taxes? When do you have to pay income tax? And when is VAT added on?
When you decide to sell your car, you basically have three options: outright sale, consignment sale or a car dealership. Each has its advantages and disadvantages – they differ in speed, the amount of profit and the level of hassle they entail. Above all, it depends on how much time you want to devote to the sale, how quickly you need the money, and whether you mind dealing with paperwork and dealing with strangers.
If you want to sell your car quickly and without hassle, then selling to a car dealership is one of the easiest solutions. Compared to selling it directly, you may get less money, but you will save yourself time, nerves and the potential complications of claims from a future buyer.
We will arrange the purchase or sale of any movable asset for you legally, without any ambiguities and pitfalls. You can sign in just 3 days.
Consignment sales are the ideal option if you want to get more money than buying directly from a car dealer, but don’t have the time or inclination to sell the car yourself. In this case, you entrust the car to a car dealer who will sell it on your behalf, but on your behalf. After the sale, they will pay you the agreed amount, less an agreed commission.
Selling your car outright is good if you want to make the most financial gain. However, this method also comes with a higher level of liability, legal risks and time commitment. However, if you are willing to pay enough attention to the sale, you can make the most of it.
What is the correct procedure for transferring a car, what will you need and why is it not worth relying on verbal agreements? We’ll answer everything in our article.
You bought a car but after a few months it stopped working? Learn how to cancel a car purchase contract.
If you normally sell a car as an individual (i.e. not as a businessman or self-employed person), then a simple rule applies: if you own the car for at least one year, the income from its sale is exempt from personal income tax. In other words, you pay no tax and you do not have to declare anything on your tax return.
However, if you sell the car before 12 months after you bought it, it is called ” other income ” and you must report it on your tax return. In this case, you can deduct the purchase price of the car from your income. So you only pay tax on the difference – that is, the profit if you sold the car for more than you bought it for.
You buy a car for CZK 200,000 and sell it for CZK 210,000 after 6 months. In your tax return you declare the income of CZK 210,000, the expenditure of CZK 200,000 and tax the profit of CZK 10,000.
If you sell the car for the same amount or less than you bought it for, you don’t pay tax, but you still report the income on your tax return – the result is zero or negative.
Different rules apply for entrepreneurs or if the car was classified as business property.
Different rules apply to the sale of a car by a business (self-employed) than for an ordinary individual, as it is usually property included in a business. If the entrepreneur sells a car included in business property, the sale proceeds are considered to be income from a business, which is subject to:
If the car has not been fully depreciated, the remaining book value of the car can be claimed as an expense in that year on sale.
If a business wants to sell the car as a private individual (tax-free), it must dispose of it as a business asset and then meet the five-year time test. Only then will the sale proceeds be exempt from income tax. If the car is sold earlier, the income is taxed as other income.
In addition, if a VAT deduction was claimed on the purchase of the car, the business is liable:
We have discussed in detail how buying and selling a company car works in another article.
Have you decided to sell your car without a middleman and want to make the most of the sale? You need to know how to do it. That’s why we’re bringing you a complete guide that will take you through the whole process, from preparing the car to transferring it to the new owner.
At the start, it’s important to clean the car thoroughly – not just on the outside, but also on the inside. It is ideal to have the interior professionally cleaned, as even normal use leaves marks that the buyer will notice. Waxing and repairing minor scratches will improve the exterior appearance of the car. It is also worthwhile to have a basic service before the sale to remove minor faults. Buyers will appreciate if you have a service book, repair invoices, etc.
To ensure the price is both realistic and a bargain, it’s a good idea to look at adverts for similar cars on portals such as Sauto.cz or Tipcars.com. Alternatively, you can have the car valued by an expert – but this option is more costly.
The advert should include all the important details about the car: make, model, year, mileage, gearbox type, fuel type, MOT, colour and equipment. Don’t forget to acknowledge any defects or damage. This should be accompanied by good quality photographs – ideally recent shots of the interior and exterior. You can offer the car on free or paid ad servers or via social networks.
When arranging viewings of the car, give priority to public places, such as a shopping centre car park. Be wary of suspicious offers and links – especially if the buyer doesn’t want to see the car in person and suggests a third-party handover. Only accept payment by a verified method, ideally cash or bank transfer on the spot.
Acontract for the sale of movable property should always be in writing – in the case of a car, it is a more significant asset and being in writing protects both parties. The contract must state the parties (name, address, date of birth/ID number), the exact identification of the car (VIN, number plate, make, type, colour, year of manufacture, odometer reading), the purchase price and the method of payment. If the price is not paid immediately, the due date and any penalties for delay should be indicated.
We also recommend describing known defects of the vehicle – transparency will prevent future disputes. The contract may also contain a so-called reservation of title, i.e. that the buyer becomes the owner only after full payment. It is also advisable to provide for withdrawal options, e.g. in case of non-payment or serious defects.
In addition to the contract of sale, prepare a handover report, which will record the condition of the car when handed over, the number of keys, documents and any equipment.
Learn what the most common mistakes in a car purchase contract are and how to avoid them.
Before the vehicle can be registered, it is necessary to have a registration check at a technical inspection station (STK). This will check that the information on the registration certificate corresponds to the actual condition of the vehicle. The check can be arranged by either the seller or the buyer, depending on mutual agreement. The price is around CZK 200-800 and the report is valid for one year.
Transcription is carried out at the transport department of any municipality with extended jurisdiction. You can go there together, or only one party can arrange the transfer – a certified power of attorney is required.
The deadline for the transfer is 10 working days from the signing of the contract of sale, and if you fail to comply, the seller can be fined up to CZK 50,000. The transcription fee is CZK 640 in case of application via the Transport Portal, otherwise it is CZK 800. For older cars that do not meet the EURO 3 standard, an environmental tax is also payable. This is determined on the basis of which emission class the vehicle falls into – for EURO 0 it is set at CZK 10,000, for EURO 1 at CZK 5,000 and for EURO 2 at CZK 3,000.
How to proceed and what to look out for when transferring a car? The next article will answer this question.
After a successful transcription, you must cancel the compulsory liability insurance with your insurance company. To do this, you usually just need to send a copy of the technical certificate with the new owner’s name on it. In some cases, the application can also be submitted electronically. Make sure the buyer has already taken out their compulsory insurance, ideally before the actual handover of the car.
You can find out how to cancel your compulsory liability insurance in our article.
The car should only be handed over after you have received the full purchase price and have proof that the buyer has arranged third party insurance. If you arranged the transfer, you can also give the new owner a new registration certificate in his name at the time of handover.
You can sell your car in three ways: directly, through a consignment sale or by buying it at a car dealership. The quickest and least time-consuming way is to buy it out – you get the money right away and the dealership takes care of everything, but you get less money. A consignment sale is a compromise – the car stays yours, the dealership offers it and pays you the agreed amount after the sale, minus commission. It takes longer, but the earnings are higher than with a buyout. You will earn the most when you sell directly, but it takes time, requires preparation of the car, communication with the buyers, registration check and complete administration including contract and transcription.
An individual does not pay income tax if they have owned the car for more than a year. For shorter periods, only the profit is taxed. Businesses have to tax the profit and pay VAT if the car was in business ownership. Remember to cancel the compulsory liability insurance after the reassignment and hand over the car only after the buyer has paid for and provided proof of the new insurance.
We will draw up a contract for the purchase of movable property for you, or check the existing one. We will handle everything quickly and flawlessly, for a predetermined price. We can do it within 3 days and within the whole country. You do not worry about anything and you can pay only after the service is provided.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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