Did you sell a car at a profit? Don’t forget to pay Income Tax

The taxpayer obliged to declare the Income Tax that sold a vehicle in 2021 needs to be especially careful when reporting to the Revenue this year. In addition to writing off the asset, it is necessary to inform whether or not there was a profit from the negotiation. If you have made a profit and the vehicle is worth more than BRL 35,000, IR is charged. This profit is called a capital gain by the IRS.

The appreciation of vehicles in 2021, driven especially by the lack of parts in the pandemic, has already made the value of the IPVA (Tax on the Property of Motor Vehicles) soar in the state of São Paulo.

According to Valdir Amorim, IOB’s tax coordinator, the legislation defines that the sale of assets and rights of up to R$ 35 thousand does not have the calculation of the IR on capital gain obtained with the sale. But, if the asset is of greater value and there is a profit, it is necessary to determine the tax to be paid by filling out the Capital Gain program, the GCAP, which can be downloaded from the Revenue website.

The filling must be done in the month of sale. If there is tax payable, the deadline to pay the IR is until the last business day of the month following the negotiation. If you have not completed the GCAP and are going to do so now, the taxpayer must download the capital gain program for the year of sale, which is 2021. In these cases, a fine and interest are charged.

“The car is considered an asset of small value. If the sale is for less than R$ 35 thousand, there will be no capital gain. This money is exempt. For example: if the person had a vehicle that, in the declaration, was registered for R$ 10 thousand, because it is old, and sold for up to R$ 35 thousand, he had a gain of R$ 25 thousand, but he will not pay tax.”

According to the rule, according to him, vehicles sold for R$ 35,000.01 already oblige the owner to determine the capital gain on the sale. “If the person had a car declared for R$40,000 and sells it for R$41,000, he will pay IR on those R$1,000.”

Felipe Coelho, Tax Manager at EY Brazil, says that one of the most common mistakes made by those who sell a vehicle is not knowing when to fill out the GCAP and pay the IR. “It is important to reinforce this issue of the tax payment deadline, which is until the last business day of the month following the sale. This is a classic Income Tax error.”

The reason, says Coelho, is that Brazilians do not understand that the IR payment is monthly and not annual, and the declaration is just an adjustment of accounts between one year and another. “The statement is only to reflect what happened in the previous year.” In the case of those who sold a vehicle above R$ 35 thousand and made a profit, the IR on the capital gain is 15%, says the consultant.

Car, motorcycle and truck, among other vehicles, are considered assets and must be declared in the “Assets and Rights” form. The code is 21, for a motor vehicle. When there is a sale, however, the taxpayer needs to write off the asset, leaving a specific field on this form to zero, which is the “Situation on 12/31/2021”.

Prepare to send the declaration

The exact date for sending the declaration has not yet been released by the Federal Revenue, but the deadline for delivery must be from the beginning of March to the end of April. The rules that oblige the Lion to be accountable should also be released soon, but it is already possible to know who is obliged to declare the tax.

Check out the step by step on how to declare:

1 – For those who sold the vehicle in 2021 and made a profit

If the vehicle was sold for more than BRL 35,000:

• Must have completed the GCAP Capital Gain Program
• If you have not done so, you will need to download the program to your computer, fill in the details and pay the tax, if any.

What to do in the 2022 income tax return:

• Open the IRPF 2022 program (which should be released soon by the IRS)
• On the left, under “Declaration Sheets”, go to “Capital Gains”
• Choose the option “Rights / Movables” and click “Import”
• The data will be imported from the GCAP program
• Afterwards, you must register the vehicle in the “Assets and Rights” sheet
• Those who already had the vehicle declared in previous years should click on the line with the code “21 – Land motor vehicle: truck, automobile, motorcycle, etc.”
• Enter the Renavam number and, under “Discrimination”, write a summary of the purchase, with year, value, year and model, name and CPF or CNPJ of the person who sold you the vehicle. Then, inform the sale, describing month, value, name and CPF or CNPJ of the person who bought the vehicle in 2021
• In “Status at 12/31/2020”, keep the previously declared value
• Leave the “Status on 12/31/2021” blank

For vehicles under BRL 35,000:

• If the vehicle sold brought a profit to the owner, but had a value below R$ 35 thousand, it is not necessary to complete the capital gain program

What to do in the 2022 income tax return:

• ​Check out the vehicle on the “Assets and Rights” sheet
• Then open a new form under “Exempt and Non-Taxable Income”; to do so, click on “New” and choose the code “5 – Capital gain on the sale of an asset, right or set of assets and rights of the same nature, disposed of in the same month, with a total value of up to BRL 20,000, for shares sold on the over-the-counter market, and R$ 35 thousand in other cases”
• Enter the amount of your profit in “Amount informed by the taxpayer”

2 – For those who sold the vehicle in 2021 and did not make a profit

• It is necessary to declare the sale only in the “Assets and Rights” sheet
• Open the form and click on the vehicle that was already informed in previous years, in the code “21 – Land motor vehicle: truck, automobile, motorcycle, etc.”
• Inform the Renavam number and, in “Discrimination”, declare the data of when you purchased the vehicle, such as the value at the time of the transaction, date of purchase, name and CPF or CNPJ of the person who sold you and year and model of the vehicle
• In the same field, also write the sale information, such as month, name, CPF or CNPJ of the buyer, in addition to the amount paid for the good
• Under “Status on 12/31/2020”, repeat the value declared in the previous year
• Leave the “Status on 12/31/2021” blank

3 – For those who bought and sold the vehicle in 2021 and made a profit

• Vehicles over BRL 35,000 pay income tax and must first be declared in the GCAP program
• Income tax, if any, must have been paid within the month following the sale.
• Anyone who regularizes the situation this year is subject to paying fines and interest.

What to do in the 2022 income tax return:

• In “New”, on the right side, below the screen, open a new card in “Assets and Rights”
• Choose code “21 – Land motor vehicle: truck, automobile, motorcycle, etc.”
• In “Discrimination”, enter the purchase and sale data, such as year and model of the vehicle, seller’s name, CPF or CNPJ, buyer’s name, CPF or CNPJ, in addition to the purchase and sale values
• Leave blank the “Status on 12/31/2020” and “Status on 12/31/2021” fields

For vehicles under BRL 35,000:

• If the vehicle purchased and sold in 2021 was worth less than BRL 35,000, but brought a profit to the owner, it is not necessary to complete the capital gain program.

What to do in the 2022 income tax return:

• ​Check out the vehicle on the “Assets and Rights” sheet
• Leave blank the “Status on 12/31/2020” and “Status on 12/31/2021” fields
• Under “Discrimination”, enter all the details of the purchase and sale
• Then open a new form under “Exempt and Non-Taxable Income”; to do so, click on “New” and choose the code “5 – Capital gain on the sale of an asset, right or set of assets and rights of the same nature, disposed of in the same month, with a total value of up to BRL 20,000, for shares sold on the over-the-counter market, and R$ 35 thousand in other cases”
• Enter the amount of your profit in “Amount informed by the taxpayer”

4 – For those who bought and sold the vehicle in 2021 and did not make a profit

• If the sale of the vehicle did not bring a profit, it is not necessary to fill out the GCAP, even if the car was valued at more than R$35,000
• Go to the “Assets and Rights” tab and open a document in “New”
• Choose code “21 – Land motor vehicle: truck, automobile, motorcycle, etc.”
• Under “Discrimination”, enter all purchase and sale data
• Leave blank the “Status on 12/31/2020” and “Status on 12/31/2021” fields