VAT margin scheme for used cars: a guide for EU dealers
How the VAT margin scheme works for used cars in the EU – when it applies, VAT on the margin only, invoicing rules and the mistakes dealers make.
· 9 min read
The VAT margin scheme lets an EU car dealer charge VAT only on the profit margin – the difference between the selling price and the purchase price – instead of on the full price of a used car. It applies to cars bought without deductible VAT, typically from private sellers. The rules are in Articles 311–343 of the VAT Directive 2006/112/EC and national VAT laws.
What is the VAT margin scheme?
The VAT margin scheme is a special arrangement for taxable dealers in second-hand goods, works of art, collectors' items and antiques. Article 313 of the VAT Directive requires every member state to apply it, and Article 315 sets the taxable amount: the profit margin made by the dealer, less the VAT relating to that margin. The profit margin is the selling price minus the purchase price.
The idea is to avoid taxing the same car twice. A private seller paid VAT when the car was new and cannot reclaim it. If the dealer then charged VAT on the full resale price, that VAT would be charged again on value that had already been taxed. Under the margin scheme, only the value the dealer adds is taxed.
National names differ, but the scheme is the same:
| Country | Name of the scheme | Legal basis |
|---|---|---|
| Germany | Differenzbesteuerung | § 25a UStG |
| Netherlands | Margeregeling | Wet op de omzetbelasting 1968 |
| Belgium | Régime de la marge / margeregeling | Belgian VAT Code |
| Poland | Procedura marży | Article 120 of the Polish VAT Act |
| Italy | Regime del margine | Italian VAT legislation |
Which cars qualify for the margin scheme and which do not
A used car qualifies for the margin scheme when it was supplied to the dealer within the EU by one of the sellers listed in Article 314 of the VAT Directive:
| Who sold you the car | Margin scheme on resale? |
|---|---|
| A private individual (non-taxable person) | Yes |
| A business that sold it VAT-exempt under Article 136 (for example, a business that had no right to deduct VAT on it) | Yes |
| A small business under the small enterprise exemption, for capital goods | Yes |
| Another dealer who sold it under the margin scheme | Yes |
| A VAT-registered company with a normal VAT invoice (leasing company, rental company, fleet owner) | No – normal VAT |
| A dealer in another EU country who sold it as an exempt intra-Community supply | No – normal VAT |
| A car imported from outside the EU | No – import VAT and normal VAT |
Two further points matter for cars:
- New means of transport are excluded from the margin scheme for intra-EU supplies. Under Article 2(2)(b) of the Directive, a motorised land vehicle counts as new if it is supplied within six months of first entry into service or has travelled no more than 6,000 km.
- The dealer can always choose normal VAT instead. Article 319 allows the dealer to apply the normal VAT rules to any supply covered by the margin scheme, for example when selling to a business buyer who wants to deduct VAT. In Germany, § 25a(8) UStG allows this waiver per supply.
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 accessHow VAT on the margin is calculated
VAT under the margin scheme is calculated from the margin including VAT, using the VAT fraction of your national rate:
VAT on the margin = (selling price − purchase price) × rate ÷ (100 + rate)
Example for a German dealer at 19%:
- Purchase from a private seller: €12,000.
- Selling price: €15,000.
- Margin: €3,000.
- VAT: €3,000 × 19/119 = €478.99.
- Net margin after VAT: €2,521.01.
Under normal VAT, the same sale would carry €15,000 × 19/119 = €2,394.96 of VAT. That difference is why the VAT scheme of a car changes how much you can pay for it. For more worked examples at different rates, see the VAT margin scheme calculator.
Can you claim VAT on a margin scheme car?
No VAT can be reclaimed on the purchase of a margin scheme car, because none was charged to you as deductible VAT. And a business buying a car from you under the margin scheme cannot deduct any VAT on it either: Article 323 of the Directive explicitly prohibits it, which is why the VAT must not appear on your invoice.
Your other costs are a different matter. Invoices for reconditioning, parts, transport, advertising and other business costs follow the normal deduction rules, so the VAT on them can generally be reclaimed. What you cannot do is add those costs to the purchase price to reduce the margin. The Directive defines the purchase price as the consideration paid to your supplier (Article 312), and the German chambers of commerce summarise the German rule plainly: costs arising after the purchase, such as repairs, do not reduce the taxable amount.
VAT margin scheme rates across the EU
Margin VAT is charged at the standard rate of the country where the car is supplied, which for a car sold from your premises is your own country. Under Article 32 of the Directive, when goods are transported, the place of supply is where the transport begins. Standard rates in 2026 and the resulting VAT fraction:
| Country | Standard VAT rate | VAT fraction of the margin |
|---|---|---|
| Germany | 19% | 19/119 = 15.97% |
| Austria, France | 20% | 20/120 = 16.67% |
| Belgium, Netherlands, Spain, Czech Republic | 21% | 21/121 = 17.36% |
| Italy | 22% | 22/122 = 18.03% |
| Poland, Portugal, Slovakia, Ireland | 23% | 23/123 = 18.70% |
| Denmark, Sweden | 25% | 25/125 = 20.00% |
| Finland | 25.5% | 25.5/125.5 = 20.32% |
The same €3,000 margin therefore leaves €2,521 after VAT in Germany, €2,479 in Belgium and €2,439 in Poland. MyCarDealer calculates the net margin after VAT at the dealer's own country rate for every car, so these differences are already included in the maximum bid it shows. You can test it with the free valuation.
What happens if a margin scheme car is sold at a loss?
If you sell a margin scheme car for less than you paid, the margin is negative and the VAT due on that car is zero. You cannot get VAT back, and in most cases you cannot offset the loss against the positive margins of other cars, because the margin is calculated per car.
Article 318 of the Directive allows member states to let certain dealers calculate a total margin per tax period instead. In practice this is limited to low-value goods: in Germany, § 25a(4) UStG allows the global margin only for items with a purchase price of no more than €750, which excludes almost every car. Treat every loss-making car as a pure loss for VAT purposes.
Buying margin scheme cars across borders
A margin scheme car bought from a dealer in another EU country stays in the margin scheme. The selling dealer charges margin VAT in its own country, and under Article 4 of the Directive the intra-Community acquisition is not subject to VAT in the buyer's country. Article 139(3) also excludes such supplies from the normal exemption for intra-Community supplies, so they cannot be invoiced as VAT-free exports to an EU business.
For you as the buyer, this means:
- the invoice must show the margin scheme wording and no separate VAT,
- you resell the car under the margin scheme in your own country at your own rate,
- your purchase price is the full price paid to the foreign dealer.
If the foreign dealer instead invoices the car as an exempt intra-Community supply with both VAT numbers, the car is not a margin scheme car, and you must account for acquisition VAT at home and charge normal VAT on resale. Our article on VAT margin scheme EU rules for buying across borders goes into the details.
Common mistakes dealers make
- Showing VAT on the invoice. Article 325 of the Directive prohibits it. In Germany, a dealer who shows the VAT on the margin separately is liable for it.
- Applying the scheme to a car bought with a VAT invoice. If the seller charged deductible VAT, the car is outside the scheme.
- Adding repair costs to the purchase price to reduce the margin.
- Netting losses against profits across different cars.
- Missing invoice wording. Article 226(14) requires the mention "Margin scheme – Second-hand goods" or the national equivalent. See our VAT margin scheme invoice example.
- Not keeping separate records. Article 324 requires dealers who use both schemes to record the transactions separately.
Frequently asked questions
What is the VAT margin scheme for used cars?
It is an EU-wide special arrangement under which a dealer pays VAT only on the difference between the selling price and the purchase price of a used car, instead of on the full selling price. It applies to cars bought without deductible VAT, for example from private sellers.
Can I claim VAT back on a margin scheme car?
No. There is no deductible VAT on the purchase of a margin scheme car, and a business buyer cannot deduct VAT on a car bought under the margin scheme. VAT on separate costs such as repairs and transport can generally be reclaimed under the normal rules.
How does a margin scheme work in practice?
You buy a used car without deductible VAT, sell it, and calculate VAT on the margin by multiplying the margin by your rate divided by 100 plus the rate. The invoice shows the total price only, with the margin scheme wording and no separate VAT.
Which cars do not qualify for the margin scheme?
Cars bought from VAT-registered businesses with a normal VAT invoice, cars bought VAT-free from another EU country as an intra-Community supply, imports from outside the EU and new means of transport supplied within the EU do not qualify.
What happens if I sell a margin scheme car at a loss?
The VAT on that car is zero, and the loss usually cannot be offset against other cars, because the margin is calculated per vehicle. Global margin calculation is only allowed for low-value goods in the countries that permit it.