Selling second-hand goods? The profit margin scheme can cut the VAT you charge

Not necessarily. The VAT "profit margin scheme" lets a reseller charge VAT only on the difference between the purchase price and the selling price (the profit margin) rather than on the full selling price — which noticeably reduces the VAT due on a resale business. The scheme covers three categories: second-hand goods (tangible moveable property suitable for further use, as-is or after repair, such as cars, electronics, and furniture), antiques (items older than 50 years with proof they were previously subject to VAT), and collectors' items (stamps, coins, and objects of scientific or historical interest with similar proof).

The core condition: the goods must have already been subject to VAT, and must have been purchased from a non-VAT-registered person, or from another VAT-registered reseller who also applied the margin scheme to the same goods, or in a case where import VAT recovery on them was blocked under Article 53. If the goods are sold at a loss (selling price below purchase price), no VAT is due at all. The calculation: VAT = profit margin × (5 ÷ 105) — meaning the profit margin itself is treated as VAT-inclusive.

In exchange, the scheme demands precise records: a stock book detailing every purchase and sale, original purchase invoices, a self-issued invoice (where the purchase was from a non-registered person) containing the seller's details, purchase date, description of goods, consideration, and the seller's signature, and evidence that the goods were previously subject to VAT in the first place. Without these records, the scheme cannot be applied even where the underlying circumstances would otherwise qualify. At RASEEKH, we set up your stock book and invoicing from day one so you actually benefit from the scheme correctly, instead of discovering too late that your records fall short.