Is VAT or vehicle registration tax payable on the purchase of a VTC licence?

The rule of thumb can be summed up in a single line: if you’re buying from a business owner or a practising professional, VAT applies; if you’re buying from a private individual, capital gains tax applies. And as this distinction can make a difference of 21 per cent to the price, it’s well worth the three minutes it takes to read the details.

• Seller is a business owner or professional (the usual case with an operating licence): the transfer is a transaction subject to 21 per cent VAT. If you’re buying as part of your business activities, that VAT is generally deductible — you pay it up front, you don’t lose it. Important point: if what is being transferred is an autonomous economic unit (the entire operating business, not just the licence), the transaction may be exempt from VAT, in which case you’ll need to check which indirect tax applies. This requires a case-by-case analysis; there’s no automatic rule.
• Transfer between private individuals: there is no VAT; Transfer Tax (ITP) applies in its form for transfers for consideration, at the rate set by your autonomous community. There is nothing to deduct here: Transfer Tax is a pure cost and must be included in your budget from the outset.
• Purchase of the holding company: you are not buying the licence but the shares, which are subject to their own tax regime (against the backdrop of the anti-fraud clause in Article 314 of the Securities Market Act). This can be efficient; it requires more thorough due diligence — we explain this in self-employed or company.

The classic costly mistake is misclassifying the transaction — paying ITP on what should have been VAT, or vice versa — and only discovering this years later in the form of a back-date assessment with interest. That’s why, in the custodial closing, the tax classification is reviewed during the due diligence phase, before signing, not afterwards.

Add to the tax figure the transfer duties and the other closing costs: the full breakdown is at what does the transfer cost. And the usual reminder, in all seriousness: check your specific situation with a tax adviser before paying the deposit. A half-hour consultation is the best investment of the entire transaction.