VAT margin scheme EU rules: buying used cars across borders
How the VAT margin scheme works when you buy used cars in another EU country: Article 313, margin vs reverse charge, new vehicle rules and paperwork.
· 8 min read
Under the VAT margin scheme EU rules, a used car bought from a dealer in another member state who applied the margin scheme stays a margin car: the seller pays VAT in his country on his margin, you pay no VAT on arrival, and you resell under the margin scheme at home. A VAT-qualifying car crosses the border VAT-free and you self-assess VAT in your own country. Cars under six months old or with up to 6,000 km are always taxed in the destination country.
How the VAT margin scheme works in the EU
The EU VAT margin scheme taxes a dealer only on the difference between the price he paid for a second-hand car and the price he sells it for. It is set out in Articles 311 to 325 of the VAT Directive 2006/112/EC, which every member state has written into national law: § 25a UStG in Germany, Article 297 A of the Code général des impôts in France, the "margeregeling" in the Netherlands and Belgium, and so on.
The core rules are the same everywhere:
- Article 313 – member states must apply a special scheme taxing the profit margin made by taxable dealers on second-hand goods.
- Article 315 – the taxable amount is the selling price minus the purchase price, less the VAT included in that margin.
- Article 319 – the dealer may choose normal VAT instead for any individual sale.
- Article 323 – a buyer cannot deduct VAT on goods supplied under the margin scheme.
- Article 325 – the dealer may not show VAT separately on a margin invoice.
What changes from country to country is the rate applied to the margin (19% in Germany, 21% in the Netherlands, Belgium and Spain, 22% in Italy, 23% in Poland) and the detailed record-keeping requirements.
Which cars qualify: Articles 313 and 314
A car qualifies for the margin scheme only if it reached the dealer through one of the channels listed in Article 314. The supplier must have been:
- a non-taxable person, usually a private individual;
- a taxable person whose supply was VAT-exempt under Article 136 (for example a business that could not deduct VAT on the car in the first place);
- a small business under the VAT exemption for small enterprises, where the car was a capital good;
- another taxable dealer who applied the margin scheme.
The fourth channel is what makes cross-border margin trading possible. A car that a Dutch dealer took in from a private customer can pass through a German dealer and a Polish dealer, each applying the margin scheme to his own profit.
A car that was bought with VAT reclaimed, such as an ex-lease or ex-rental car sold by the leasing or rental company, does not qualify. It is VAT-qualifying, and every later sale must carry full VAT until it reaches a private owner again.
For car dealers
Know your margin before you buy
MyCarDealer compares any car from an auction or listing with the market in your country and shows the net margin after VAT, transport and costs – and the maximum bid.
Request accessBuying a margin car from a dealer in another member state
Yes, you can buy a margin car from a dealer in another EU country, and it remains a margin car for you. Article 4(a) of the Directive says the intra-Community acquisition of second-hand goods is not subject to VAT where the seller is a taxable dealer and has applied the margin scheme in the country of dispatch. Article 139(3) adds that such a supply cannot be zero-rated as an intra-Community supply. Germany puts the same rule in § 25a(7) UStG.
In practice:
- The foreign dealer invoices a gross price with the margin reference, for example "Gebrauchtgegenstände/Sonderregelung" from Germany or "Régime particulier – Biens d'occasion" from France.
- He pays VAT in his country on his margin. You never see that figure.
- You declare nothing on arrival and cannot reclaim anything.
- You resell under your own country's margin scheme, with the full invoice price as your purchase price.
VAT-qualifying cars: intra-Community supply and "reverse charge"
When you buy a VAT-qualifying car from another member state, the seller invoices it without VAT and you account for VAT in your own country. Dealers call this the reverse charge; technically it is an exempt intra-Community supply by the seller (Article 138) and a taxable intra-Community acquisition by you (Article 2(1)(b)).
Since the 2020 "quick fixes" (Directive 2018/1910), the seller can zero-rate the sale only if:
- you have given him a valid VAT identification number from another member state (Article 138(1)(b)), which he should check in VIES;
- he reports the sale in his recapitulative statement (Article 138(1a));
- he can prove the car left his country, usually with a transport document and an entry confirmation signed by you. Article 45a of Implementing Regulation 282/2011 sets the presumption of transport; in Germany the classic document is the Gelangensbestätigung.
You then declare VAT on the net price at your rate and, as a fully taxable dealer, deduct it in the same return. The cash effect is zero, but the car is now VAT-qualifying in your hands: you must charge full VAT when you sell it. You cannot switch it into the margin scheme.
| Margin car from abroad | VAT-qualifying car from abroad | |
|---|---|---|
| Seller's invoice | Gross, margin reference, no VAT | Net, "intra-Community supply", your VAT ID |
| VAT in seller's country | On seller's margin | None |
| VAT on arrival | None | Self-assessed at your rate, deducted |
| VAT on your resale | Your country's rate on your margin | Your country's rate on full price |
| Documents seller needs from you | None special | VAT ID, signed entry confirmation |
New means of transport: always taxed at destination
A car counts as a "new means of transport" when it is supplied within six months of first entry into service or has travelled no more than 6,000 kilometres (Article 2(2)(b)(i) of the VAT Directive). This covers many demonstrators, pre-registered cars and short-term rentals.
For such cars, the margin scheme does not apply to the cross-border supply (Article 313(2)), and VAT is always due in the country of destination, even if the seller is a private person. A four-month-old demonstrator with 3,500 km bought from a German dealer is therefore taxed in your country on the full price, whatever the invoice says. Check the first registration date and the odometer before you agree a gross price.
Which documents prove the margin scheme was applied
The invoice is the key document. Article 226(14) requires the mention "Margin scheme – Second-hand goods" or its official equivalent in the seller's language. Keep with it:
- the purchase contract with the seller's VAT number;
- the foreign registration certificate (both parts, if issued), which your registration authority will withdraw;
- payment proof matching the invoice;
- for qualifying cars, the transport document and your signed entry confirmation.
If a tax inspector later finds that the car was really VAT-qualifying (for example an ex-lease car invoiced as margin by mistake), the margin treatment can be denied and you may owe VAT on the full resale price. A one-line question to the seller about where the car came from is cheap insurance. More detail on layout and wording is in our VAT margin scheme invoice example.
How cross-border VAT changes your purchase calculation
The VAT status decides which number you compare with your selling price. Take a Belgian dealer (21% VAT) who expects to sell a car for €19,000.
- Margin car from Germany at €15,500. The margin is €3,500. VAT is €3,500 × 21/121 = €607. Gross profit before costs: €2,893.
- VAT-qualifying car from Germany at €13,000 net. Acquisition VAT of €2,730 is declared and deducted. On the sale, VAT is €19,000 × 21/121 = €3,298, leaving €15,702 net. Gross profit before costs: €2,702.
The two offers look €2,500 apart but earn almost the same. Add transport, registration and preparation, then compare with your target. Our guides on importing a car from Germany and the VAT margin scheme for used cars cover those costs. MyCarDealer applies the correct VAT treatment for cars sourced abroad, using your country's rate, before it shows the margin; you can try it on one car with the free valuation.
Frequently asked questions
Can I buy a car under the margin scheme from a dealer in another EU country?
Yes. If the foreign dealer applied the margin scheme, the car stays a margin car: he pays VAT on his margin in his country, you pay no VAT on arrival, and you resell it under your own country's margin scheme. The invoice must carry the margin scheme reference.
When does the reverse charge apply to cross-border used car purchases?
When the car is VAT-qualifying, for example an ex-lease car, and you buy it as a VAT-registered business. The seller zero-rates the sale if you provide a valid VAT number and the car is transported to another member state. You self-assess VAT at home and deduct it in the same return.
What makes a car a "new means of transport" for VAT?
A car supplied within six months of first entering service, or one that has travelled no more than 6,000 km, under Article 2(2)(b) of the VAT Directive. Such cars are always taxed in the destination country and cannot be sold cross-border under the margin scheme.
Which documents prove the margin scheme was applied by the seller?
The invoice with the mention "Margin scheme – Second-hand goods" (or the national equivalent, such as "Gebrauchtgegenstände/Sonderregelung"), without VAT shown separately. Keep it together with the contract, payment proof and the foreign registration documents.
Can I resell a car bought under the reverse charge under the margin scheme?
No. If you acquired the car VAT-free as an intra-Community acquisition and deducted the VAT, you must charge VAT on the full selling price. The margin scheme only applies to cars obtained through the channels in Article 314.