VAT on the margin: a guide for selling second-hand jewelry and watches
When you resell a used watch or piece of jewelry purchased from an individual, you don't charge VAT on the entire sale price, but only on your profit margin. Here's how it works.
- VAT on the margin applies to second-hand goods purchased VAT not recoverable (to a private individual, in particular).
- VAT is calculated on the margin (selling price − purchase price), not on the total price.
- The bill does not show the VAT ; it bears a specific inscription.
- Two calculation methods: on a case-by-case basis, or by globalization over a period of time.
Why a special regime?
When you buy a used watch from a private individual, there is no VAT on the purchase: therefore, you cannot deduct anything. To prevent VAT from accumulating on each resale of the same item, the government has established the "margin scheme." You only pay VAT on the amount you add, i.e., your profit margin.
When does it apply?
The margin scheme applies to the taxable reseller who sells a second-hand goods that he acquired from someone who did not charge him VAT: an individual, or another professional himself under the margin scheme.
Typical example: you buy back a watch from a private customer, then you resell it. Conversely, if you have bought an asset with deductible VAT (with a supplier subject to VAT), the normal regime applies, not the margin scheme.
How to calculate VAT on the margin
The margin is considered VAT included VAT is included, so it must be deducted. At the standard rate of 20% (%):
- Purchase price to individuals: 1 000 €
- Resale price: 1 500 €
- Margin (including VAT): 500 €
- VAT to be paid: 500 × 20 / 120 = 83,33 €
Two methods exist. The method on a case-by-case basis Calculate the margin item by item: this is the rule for valuable, identifiable objects (a watch, a piece of jewelry). The method by globalization calculates the margin on all purchases and sales of a period: it is useful for low value batches that are difficult to track individually.
What should (or should not) be included on the invoice
Under the margin scheme, the VAT must never appear separately on the invoice, and your client cannot deduct it. The invoice must, however, include a statement such as "« Special regime – Second-hand goods » (Article 297 A of the General Tax Code).
The pitfall: don't confuse it with the tax on precious metals
If you buy gold from an individual to resell it as matter (cast iron, ingot), you are not on the margin scheme but on the flat tax on precious metals, which obeys its own rules. The margin scheme applies to the resale of a object second-hand (a watch, a piece of jewelry), not the melted material.
How Jewely Retail handles VAT on margin
L'’ERP Jewely Retail automatically distinguishes used sales, calculates the margin, applies the correct tax regime and produces own accounting exports, with the correct information on your documents. This will help you avoid VAT errors when reselling, without even having to think about it.
VAT on margin in Jewellery Retail
Jewely Retail identifies second-hand sales, calculates the margin and applies the corresponding regime to accounting documents and exports.
This article is for informational purposes only and does not replace the advice of your accountant. Rules and thresholds may change: check with official sources (impots.gouv.fr) or your advisor before making any decisions.