Margin scheme: Second-hand traders and VAT

In short: Traders who buy used items from private persons and resell them can, under § 25a UStG, tax only the trading margin instead of the whole selling price.

In more detail: In normal trade the trader pays VAT on the selling price and deducts input tax from purchasing. When buying from private persons there is no input tax: taxing the full selling price would create a double burden. The margin scheme solves this. This is general information and not legal or tax advice; rules change, check them with the tax office, chamber or advisers.

In Depth

The principle

Only the margin (difference between selling and purchase price) is taxed, and VAT is included in it (19 % of the margin, calculated out of the gross amount: margin × 19/119). Example: purchase 100 €, sale 160 €: margin 60 €; VAT = 60 × 19/119 ≈ 9.58 €. Instead of 25.55 € under standard taxation (160 € gross → 25.55 € VAT).

Requirements

• Resellers (acting commercially).
• Goods were acquired in the Community territory from: private persons, small businesses, other margin-scheme traders or where the seller had no input-tax deduction.
• Burden of proof: records per item (purchase, sale, margins, supplier) and invoices/receipts.
• On the invoice show no VAT but a note “Margin scheme according to § 25a UStG” (the buyer cannot deduct input tax).
• Items: movable tangible goods, works of art, collectibles and antiques (partly special rules).

Small business?

Whoever is a small business under § 19 UStG charges no VAT and does not need the margin scheme. It becomes relevant when you exceed the small-business limit or voluntarily opt for standard taxation (for example with lots of resale). Record-keeping (individual documentation) is also laborious: for bulk business you can use a total margin per period (for goods with a low purchase price under 500 € per piece).

Practice

Keep a table: item number, description, purchase date/price, supplier (private person), sale date/price, margin. Separate standard-taxed and margin-scheme goods. Plan price calculation including margin, fees (platform), shipping, packaging, taxes. Tax advice is especially worthwhile here because mistakes are expensive. For beginners with small volume the small-business rule is often simpler.

See also: VAT: rates and basic terms, Small-business rule, Selling privately or commercially, Calculating prices