Margin Scheme Taxation

Margin scheme taxation is a VAT procedure under § 25a UStG (German VAT Act). It applies when dealers resell used goods, works of art, or collectibles. VAT is then not charged on the full selling price, but only on the difference between the purchase price and the selling price — the dealer only pays tax on their margin.

Who does this affect?

• Dealers of used goods (e.g. firearms, watches, electronics)
• Online platforms and retailers reselling privately owned items
• Buyers, who should not expect VAT to be shown separately on the invoice

Why is VAT not shown on the invoice?

Since the tax is calculated only on the profit margin, the law does not permit VAT to be listed separately on the invoice. Buyers therefore cannot reclaim input tax — this is particularly important for business customers to know.

What are the benefits of the margin scheme?

• Competitive advantage for dealers: lower tax burden on used items
• Lower prices for customers: because the full VAT rate is not added on top
• Simpler pricing calculations when purchasing from private individuals

What appears on the invoice?

Invoices for margin-scheme items include a note such as:

"Second-hand goods / Special scheme under § 25a UStG — VAT not separately stated."

A practical example:

• Purchase price: €800
• Selling price: €1,000
• Tax is applied only to the difference: €200
• 19% VAT thereon ≈ €32