What should be noticed when selling a company car?
The car should be treated as disposed of at market value when the car was sold for less than its market value (EE 45(3)). Market value can be determined by ways like looking at 3 Trademe vehicles of similar year & make and take average of those figures; or it could be determined by obtaining a valuation letter from a registered vehicle dealer.
GST is another issue. The company has to charge GST on the sold vehicle and return this GST to IRD.
If the car was sold to a shareholder of the company, ideally there must be a payment from shareholder bank account to company bank account, but if the shareholder account is in credit and debit entry may be sufficient.
If the selling price exceeds the car’s adjusted tax value, the company is subject to depreciation recovery income no matter the company had claimed depreciation deduction or not. The details can be refer to article Depreciation.
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