VAT Margin Scheme: The Complete 2025 Guide
The VAT margin scheme is a special arrangement that allows dealers in second-hand goods, works of art, collectors' items, and antiques to calculate VAT only on their profit margin rather than the full selling price. This guide explains how the scheme works and when you can use it.
What is the Margin Scheme?
Basic Principle
Under the normal VAT system, you charge VAT on the full selling price. Under the margin scheme:
| Normal VAT | Margin Scheme |
|---|---|
| VAT on full selling price | VAT on profit margin only |
| Input VAT deductible | No input VAT deduction |
| VAT shown on invoice | VAT not shown separately |
Example:
- Purchase price: €800 (no VAT deductible)
- Selling price: €1,200
- Margin: €400
- VAT (at 20%): €66.67 (calculated as 400 × 20/120)
👉 Calculate VAT: VAT Calculator Germany | VAT Calculator France
Who Can Use the Margin Scheme?
Eligible Businesses
The margin scheme is available to "taxable dealers" who:
- Purchase goods for resale in the course of business
- Buy from specific categories of sellers
- Deal in eligible goods categories
Eligible Suppliers
You can use the margin scheme when buying from:
| Supplier Type | Margin Scheme Applicable? |
|---|---|
| Private individuals | ✅ Yes |
| Non-taxable entities | ✅ Yes |
| Small businesses (VAT exempt) | ✅ Yes |
| Another margin scheme dealer | ✅ Yes |
| VAT-registered business | ❌ No (unless margin scheme) |
| Import from non-EU | ❌ No |
Ineligible Purchases
You cannot use the margin scheme for goods purchased from:
- VAT-registered businesses charging VAT
- Imports where import VAT was paid
- Intra-EU acquisitions with VAT
Eligible Goods Categories
Second-Hand Goods
Tangible movable property suitable for further use, either as is or after repair:
- Used vehicles (cars, motorcycles, boats)
- Second-hand clothing
- Pre-owned electronics
- Used furniture
- Vintage items
Works of Art
As defined by customs tariff classifications:
- Paintings and drawings (entirely by hand)
- Original engravings and prints
- Original sculptures and statuary
- Tapestries and textile wall hangings
- Ceramics and pottery (signed by artist)
Collectors' Items
- Postage stamps
- Revenue stamps
- Coins and medals
- Natural history collections
- Historical collections
Antiques
Objects more than 100 years old (except works of art and collectors' items which have their own criteria).
Calculating VAT Under the Margin Scheme
The Margin Calculation
Formula: VAT = (Selling Price - Purchase Price) × VAT Rate / (100 + VAT Rate)
Worked Example:
| Item | Amount |
|---|---|
| Purchase price | €5,000 |
| Selling price | €7,500 |
| Margin | €2,500 |
| VAT rate | 20% |
| VAT due | €416.67 |
Calculation: €2,500 × 20 / 120 = €416.67
Negative Margins
If the selling price is less than the purchase price (a loss), no VAT is due on that transaction. However, you cannot claim back VAT or carry forward losses to offset future margins.
Global Margin Scheme
Some countries allow a "global margin scheme" where:
- All purchases in a period are totaled
- All sales in the same period are totaled
- VAT is calculated on the overall margin
This simplifies record-keeping for high-volume, low-value items.
Country-Specific Rules
Germany (Differenzbesteuerung)
- Standard margin scheme available
- Global margin scheme option for specific goods
- 19% VAT rate on margin
- Must keep detailed purchase records
France (Régime de la marge)
- Available for all eligible goods
- Option for global margin calculation
- 20% VAT rate on margin
- Specific rules for motor vehicles
Italy (Regime del margine)
- Standard and global schemes available
- 22% VAT rate on margin
- Detailed record-keeping requirements
- Special rules for art and antiques
Spain (Régimen especial de bienes usados)
- Available for second-hand goods dealers
- 21% VAT rate on margin
- Specific rules for vehicles
- Global scheme option available
United Kingdom
- Post-Brexit rules largely similar to EU
- 20% VAT rate on margin
- Global Accounting Scheme for eligible dealers
- Strict record-keeping requirements
Record-Keeping Requirements
Essential Records
For each margin scheme transaction, maintain:
-
Purchase records:
- Date of purchase
- Supplier name and address
- Description of goods
- Purchase price
- Stock reference number
-
Sales records:
- Date of sale
- Buyer details (if applicable)
- Description of goods
- Selling price
- Stock reference number
-
Stock records:
- Link purchases to sales
- Track items through business
Invoice Requirements
Margin scheme invoices must NOT show VAT separately. Include:
- Clear statement that margin scheme applies
- Your business name and address
- Invoice number and date
- Description of goods
- Total price including VAT
Example wording: "This invoice is issued under the margin scheme. VAT is not shown separately and is not recoverable."
Special Situations
Motor Vehicles
Special rules apply to used cars and vehicles:
- Most countries require individual item records (not global)
- Some jurisdictions have simplified schemes for low-value vehicles
- Export vehicles may need special documentation
Auctioneers
Auctioneers acting on behalf of margin scheme suppliers can use the scheme with specific modifications:
- Commission-based calculation rules
- Special invoice requirements
- Detailed buyer and seller records
Mixed Supplies
When a dealer has both margin scheme and normal VAT purchases:
- Keep separate records for each type
- Apply correct VAT treatment to each sale
- Cannot mix input VAT recovery with margin scheme
Advantages and Disadvantages
Advantages
✅ Lower VAT on sales (only on margin) ✅ Competitive pricing possible ✅ Simplified for goods without VAT invoices ✅ Suitable for private purchase acquisition
Disadvantages
❌ No input VAT recovery ❌ Complex record-keeping ❌ Cannot show VAT on invoices ❌ B2B customers cannot reclaim VAT
Practical Examples
Example 1: Antique Dealer
Scenario: German antique dealer purchases a 150-year-old chair from a private seller for €2,000 and sells it for €3,500.
Calculation:
- Margin: €3,500 - €2,000 = €1,500
- VAT: €1,500 × 19/119 = €239.50
- Net margin after VAT: €1,260.50
Example 2: Used Car Dealer
Scenario: French used car dealer buys a car from a private individual for €8,000 and sells for €10,500.
Calculation:
- Margin: €10,500 - €8,000 = €2,500
- VAT: €2,500 × 20/120 = €416.67
- Net profit after VAT: €2,083.33
Example 3: Art Gallery
Scenario: Italian gallery purchases a painting from the artist (who used flat-rate scheme) for €15,000 and sells for €25,000.
Calculation:
- Margin: €25,000 - €15,000 = €10,000
- VAT: €10,000 × 22/122 = €1,803.28
- Net margin: €8,196.72
Compliance Checklist
- Verify goods are eligible for margin scheme
- Confirm supplier is eligible category
- Maintain detailed purchase records
- Keep stock records linking purchases to sales
- Issue compliant invoices (no separate VAT)
- Calculate VAT correctly on margin
- Report margin scheme sales separately in VAT return
- Retain records for required period (typically 6-10 years)
Official Resources
Conclusion
The VAT margin scheme offers significant benefits for dealers in second-hand goods, art, and antiques. Key takeaways:
- Eligibility matters: Only use for qualifying goods from qualifying suppliers
- Record-keeping is critical: Maintain detailed records linking purchases to sales
- Invoice correctly: Never show VAT separately on margin scheme invoices
- Calculate carefully: Use correct formula for your country's VAT rate
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Last updated: January 2025
