Margin VAT, how does it work?
VAT margin schemes were launched in 2007 for “taxable dealers” in EU Member States.
This regime offers advantages in the resale of specific goods, such as used smartphones, because it allows you to preserve the net margin by paying less VAT.
The regime applies to:
- used goods
- works of art, collectibles and antiques
Conditions of application :
For this regime to apply, products must be purchased from:
- a private client
- a wholesaler, reconditioner or company that has benefitted from the VAT margin regime
Products are NOT eligible when:
- imported to the EU from the US, Asia, the Middle East, etc.
- purchased from a company that charged classic VAT on this inventory.
- purchased under the “classic” intra-community regime from another EU state.
The regime is optional. It will still be possible for second-hand smartphones purchased using VAT on margin to be processed with “classic” VAT (Art 297 C of the French General Tax Code), for companies wanting to recover the VAT (rental company, integrator, etc…). The reverse is not possible.
VAT margin products leaving the EU are exempt from VAT.
The origin of the flow in France
- The operators SFR, Orange, Bouygues Telecom and MVNO have “buy-back” programmes developed with French and European reconditioners. Once the mobiles are collected, they are sorted and tested for resale.
- Pure Internet players who collect smartphones from individuals remotely.
- Retailers specialising in the second-hand market with “over-the-counter” purchases from individuals.
The special wording "TVA sur Marge régie par l’article 297 du CGI" (Margin VAT Margin governed by article 297 of the CGI) must appear and the VAT rate of 0% applied on the invoice.
The amount of margin VAT can never appear on the purchase or sale invoice.If you sell the stocks to another EU member state, the scheme remains the same: the VAT collected is to be declared in France and the wording "Margin VAT" in English must appear on the invoice. Your declaration of exchange of goods (DEB) must be regularised according to regime code 29.
There are two systems for calculating margin VAT, “piecemeal” or “globally”.
- The margin is calculated for each transaction, so it is necessary to know the purchase price of the goods.
- Loss-making transactions cannot be charged to the beneficiaries.
- In the event of the sale of goods from a heterogeneous lot, the margin is assessed at a flat rate of 50% of the sale price.
- Each month, the purchases and sales for the period are reconciled after taxes to determine an overall tax margin.
- If the amount of purchases exceeds that of sales, the excess is added to purchases for the following period.
- The overall margin obtained is a margin including tax which must be reduced to an amount excluding tax.
You buy a batch of “Margin VAT” refurbished iPhones from a verified seller on Agora Place.
The unit purchase price is € 200 including tax (= € 200 excluding tax).
You resell these products to your end customer at € 275 including tax.
>> Resale margin VAT:
Your commercial margin including tax: 275–200 = € 75.
Your commercial margin excluding tax: 75/1.2 = € 62.50
VAT amount: 62.5 X 20% = € 12.50
Your net margin: 75–12.5 = € 62.50
>> Resale classic VAT:
Turnover excluding tax: € 275/1.2 = € 229.17 excluding tax
VAT amount: € 45.83
Your net margin: € 275 - 200 - 45.83 = € 29.17
What about repaired products?
Products may be considered to have undergone repair if this only results in a simple repair and not a complete renovation. The value of the parts for the reconditioning must not exceed the value of the smartphone which has been reconditioned, otherwise “classic” VAT must be used.
Costs incurred for the repair by the dealer when acquiring used goods are not included in the purchase price and therefore cannot be deducted from the tax base.
Good to know!
- The 2 VAT regimes can coexist on the same invoice if a new product (or a service) is purchased alongside a used product with margin VAT. The invoice will then be “mixed”.
- For good traceability in your stocks, it is strongly recommended you associate the VAT regimes with the IMEIs when they enter stock. Verification can be performed more quickly in the event of an audit. A reliable supplier can provide the list of IMEIs for your orders, as is the case on Agora Place.
- A reduced VAT rate for second-hand products was proposed in 2018, but the Assembly did not approve its implementation.
- There are 10 wholesalers specialising in margin VAT on Agora Place, do you know them? You can compare the best European reconditioned stocks and make your orders, for free, here.
To find out more:
https://ec.europa.eu/taxation_customs/ business/vat/eu-vat-rules-topic/special-schemes_fr TVA - Sectoral regimes - Second-hand goods, works of art, collectibles or antiques… The taxation concerns the sales of used goods made by the people who have used them for the needs of… bofip.impots.gouv.fr