VAT - margin scheme – changes per 1 January 2025

Changes to the margin scheme

In 2025, the margin scheme will be changed, meaning that entrepreneurs will no longer be able to apply the scheme if the goods were purchased with the reduced VAT rate. As a result, when these goods are sold, the full compensation falls under the (usually) 21% rate.

The margin scheme

The margin scheme is a specific part of the VAT legislation that prevents second-hand goods, works of art, collector's items and antiques from being fully included in the VAT levy again. The entrepreneur who sells these goods, purchases these goods without being able to deduct the VAT on the purchase. For example, the second-hand car or the antique cupboard that is purchased from a private individual. The private individual has already paid VAT once on the previous purchase. No VAT is charged by the private individual upon delivery to the entrepreneur. When the car or antique cupboard is subsequently sold, VAT is then charged again on the total sales price without further regulations, including the VAT that is already included in those goods. Application of the margin scheme prevents this. The entrepreneur who purchased these goods for (e.g.) € 2,000 and sold them for € 2,750, only has to pay VAT on the margin, which is € 750.

Supplementary margin scheme (KAV goods)

At the request of the entrepreneur, the margin scheme can also be applied if the goods were purchased with VAT and at the reduced VAT rate. Although the VAT on the purchase may not be deducted, the margin scheme may still be applied to the sale upon request. This applies to the following goods:

- Art

- Antiques

- Collectors' items

The scope of the term collectors' items is quite broad and covers, among other things, objects of historical, archaeological or ethnographic importance. As a result, for example, classic cars also fall under this term.

Amendment to the supplementary margin scheme (KAV goods)

The European Member States believe that this supplementary margin scheme can lead to distortion of competition. Entrepreneurs can import and sell these goods from Member States with (relatively) low VAT rates. The reasoning is that other Member States with higher VAT rates miss out on these activities because these goods are no longer sold and/or imported there.

With the change as of 1 January 2025, the supplementary margin scheme can no longer be applied if the goods were purchased at the reduced VAT rate. This change applies to all Member States. This means that if antiques, art or collector's items are purchased at the reduced rate, the entire sales price is subject to VAT and no longer just the margin. Under the amended regulations, the entrepreneur can deduct the VAT (reduced rate) on the purchase, but the change nevertheless has a huge impact on the sales price. If the goods are purchased at the standard VAT rate, the supplementary margin scheme continues to apply.

Other effects of the change

If the supplementary margin scheme does not apply to your sales, this also means that foreign VAT may be due on this sale if the buyer is established or lives in another EU Member State. This could lead to your company being registered for VAT in that Member State. There are ways to prevent this.

Transitional arrangement

If you have goods in stock that were purchased at the reduced VAT rate and you cannot sell these goods before 1 January 2025, you will be given the opportunity to deduct the VAT paid on these purchases. This can only take place during the 1st quarter of 2025!

If you would like to be informed in more detail about the consequences of this change, please do not hesitate to contact us.

If you have any questions about this topic or if you would like to discuss the topic further, please do not hesitate to contact us at info@vatpartners.com