Recommerce shares with us some light on margin VAT. VAT on margin scheme is a fiscal tool established by Directive 2006/112/EC at the European level. It applies to second-hand goods, such as refurbished Apple iPhones and other smartphones and ensures that VAT is only charged on the reseller’s margin, not the full resale price. For instance, when a phone is bought for € 120 and resold for € 200, VAT, that varies by country, is applied to the € 80 margin.. This approach encourages fair taxation while promoting reuse.
Why this regime matters
By taxing only the margin, the scheme avoids double taxation and incentivizes local buyback programs. It enhances traceability through IMEI numbers, origin tracking, and proper invoicing. When applied correctly, the margin VAT regime strengthens consumer trust and supports a structured circular economy.
Strict conditions for eligibility
The VAT on margin regime is not automatic. To qualify, a product must be sourced from within the EU and from a private individual or non-VAT-liable entity. It must also be traceable through serial numbers and invoices. Products sourced from outside the EU, such as from China or the US, are not eligible and must follow standard VAT rules. Funny (or not) today we received a mail from a Chinese company stating that could deliver margin VAT products from China through their Spanish agent:
Clearly this is not possible and only leads to marginal VAT fraud.
The risks of VAT misuse
Improper application of the regime creates unfair competition. Products imported from non-EU countries and wrongly sold under the margin VAT scheme result in significant losses to public revenue and distort market pricing. The European Public Prosecutor’s Office (EPPO) uncovered € 14 million in fraud in one 2024 case alone, spanning six countries. SecondaryMarket.news reported earlier on this.
What the industry must verify
Marketplaces, retailers, and buyers should confirm the product’s EU origin, verify CE markings, retain original invoices, and demand clear VAT status on each sale. IMEI or serial numbers are critical to ensure compliance and guard against fraud. Transparency at every step reduces exposure during audits and disputes.
Traceability: a foundation for trust
Traceability goes beyond compliance; it ensures market fairness. It helps verify origin, document the refurbishment journey, and confirm eligibility for margin VAT. For companies, it’s a tool to protect operations and uphold standards in an increasingly regulated landscape.
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Refurbishing
