Purchase of motor vehicles

A distinction must be made between the import of motor vehicles from a third State outside the European Union (EU), the purchase of motor vehicles within the EU, and their purchase within Germany.

The Federal Foreign Office draws your attention to its circular note No. 01/2022 – Ref. 701-701 AM 15 Allg. (vehicles).

Import of motor vehicles from a third State outside the EU

The duty-free import (i.e. exempted from customs duties and import turnover tax) of official motor vehicles (used and new) for diplomatic missions and career consular posts is in principle not subject to any quantitative restrictions (quotas). However, quotas may result from individual agreements on reciprocity in customs matters.

In contrast, the duty-free import of motor vehicles (used and new) for the private use of entitled home-based members of diplomatic missions and career consular posts is subject to quantitative restrictions (quotas). The size of a country’s quota is governed by the relevant agreement on reciprocity in customs matters. If the agreement on reciprocity does not contain any quantitative restrictions, each entitled person (the entitled members of a diplomatic mission or career consular post) may in principle import duty-free one motor vehicle for themselves and for members of their family who have attained the age of majority, provided they live in the entitled person’s household and do not have German nationality, every two years. The two-year period begins with the import of each motor vehicle in the German part of the EU’s customs territory.

If an official motor vehicle or a motor vehicle for private use has been imported duty-free or at a reduced rate of duty, it may not be sold of duty-free before the expiry of the period set by the agreement on reciprocity in customs matters. If no period is specified, a period of two years will be applied. If the vehicle is sold prior to the expiry of this period, the relevant customs office will subsequently invoice the seller for the duties.

Purchase of a motor vehicle within the EU

Pursuant to section 4 (b) 3 of the Turnover Tax Act (Umsatzsteuergesetz – UStG), diplomatic missions or career consular posts and their entitled home-based members may purchase new vehicles within the European Union tax-free, provided the import of such vehicles would be tax-free under the regulations governing import turnover tax. The rules therefore apply as set out in the customs regulations and the relevant agreement on reciprocity in customs matters (cf. Import of motor vehicles from a third State outside the EU).

If a new vehicle purchased in the European Union with the benefit of a tax exemption is not used or is used only in part for the purposes specified in sections 1 and 2 of the Regulation on the Reimbursement of Turnover Tax (Umsatzsteuererstattungsverordnung – UStErstV) prior to the expiry of the period specified in the agreement on reciprocity in customs matters, the Federal Central Tax Office will subsequently levy the turnover tax due on the purchase within the EU. If no period is specified in the agreement on reciprocity in customs matters, a period of two years will be applied.

In contrast, the purchase of used cars within the European Union is subject to the turnover tax rules and any agreements on reciprocity in turnover tax matters (cf. Purchase of motor vehicles in Germany).

Purchase of motor vehicles in Germany

When vehicles are purchased in Germany, turnover tax will, pursuant to the Regulation on the Reimbursement of Turnover Tax (Umsatzsteuererstattungsverordnung – UStErstV), also be refunded by the Federal Central Tax Office on the basis of an agreement on reciprocity.

The diplomatic missions and career consular posts may in principle purchase an unlimited number of official vehicles tax-free in Germany, unless otherwise stipulated in the applicable agreement on reciprocity in turnover tax matters.

If the agreement on reciprocity does not contain any quotas, the entitled members of a foreign diplomatic mission or career consular post may in principle purchase at most one vehicle for the private use of themselves and those members of their families who have attained the age of majority, provided they live in an entitled member’s household and do not have German nationality, every two years. The two-year period begins with the first registration of each vehicle in Germany.

If an official motor vehicle or motor vehicle for private use purchased tax-free in Germany is not used or is used only in part for the purposes specified in sections 1 and 2 of the Regulation on the Reimbursement of Turnover Tax before the two years are up (e.g. if it is sold earlier, used by third parties, used after the loss of privileges, exported earlier, or taken out of service), the responsible Federal Central Tax Office will subsequently levy the tax.

Quotas

The quotas for imports from third States on preferential terms, purchases within the European Union and purchases in Germany may be combined in any way as long as the total number of vehicles acquired does not exceed the total permitted under all three quotas. This corresponds to international practice whereby home-based officials have the option of purchasing vehicles tax-free in the host country or importing their vehicle duty-free within the quotas set by the agreements on reciprocity.