How does differential taxation work for used items?
September 20, 2023 | 40,00 EUR | answered by Quentin Reuter
Dear tax advisor,
My name is Wilhelm Reuter and I operate an online business selling used items. So far, I have been applying the standard taxation for VAT, but I have heard that there is also the option of differential taxation. I am unsure about how exactly this works and whether it could be advantageous for my business.
Currently, I buy used items from individuals and resell them. This raises the question for me of how to correctly calculate and pay the VAT. I am concerned that I may be paying too much VAT or making errors in the calculation that could lead to additional payments.
Could you please explain to me how differential taxation works for used items? What requirements do I need to meet in order to apply this? Are there any specific peculiarities or pitfalls that I should be aware of? And ultimately, could differential taxation be a sensible alternative to standard taxation for me as an online retailer of used items?
I thank you in advance for your support and expertise.
Kind regards,
Wilhelm Reuter
Dear Wilhelm Reuter,
Thank you for your inquiry regarding the margin scheme in connection with your online trade in used items. I am pleased to be able to assist you and provide you with more information on this topic.
The margin scheme is a special regulation for used items that allows for the calculation of VAT not on the entire sales price, but only on the difference between the purchase and sales price. This has the advantage of reducing the VAT burden for the trader, as only the profit is taxed, not the entire turnover.
However, in order to apply the margin scheme, certain conditions must be met. First of all, the items must be used and must have been purchased from private individuals or other non-VAT taxable businesses. Additionally, the sale of the items must not be subject to the standard VAT scheme. This means that they must not be burdened by input tax deduction or other tax regulations.
It is important to note that the margin scheme can only be applied upon request to the tax office. The application must be made at the beginning of the tax period and must be valid for at least five years. Therefore, it is advisable to carefully inform yourself about the advantages and possible disadvantages of the margin scheme and, if necessary, seek tax advice.
For online traders dealing in used items, the margin scheme can be a viable alternative to the standard VAT scheme, as it reduces the VAT burden and can lead to a higher profit margin. However, it is important to familiarize yourself with the specific requirements and regulations in order to avoid errors in application.
I hope this information is helpful to you and supports you in your decision. If you have any further questions or would like more detailed advice, I am at your disposal.
Best regards,
Quentin Reuter
