VAT Regime for Used Goods: Everything You Need to Know
Contents:
The special VAT regime for used goods is a fiscal tool that seeks to avoid double taxation in the purchase and sale of used goods. Regulated by Articles 135 et seq. of the VAT Law, this regime allows resellers to pay tax only on the profit margin, rather than applying VAT to the full resale price.
Why is this regime important?
Imagine the case of a vehicle dealer who purchases a used car from a private individual for €10,000. This vehicle, purchased new for €30,000 plus €3,600 in VAT, did not allow the end consumer to deduct the tax. If the car is resold for €15,000 and the full VAT is applied, we would be talking about double taxation on the same asset.
The special regime corrects this situation by taxing only the profit margin. In the previous example, the margin would be €5,000 (€15,000 - €10,000). Including VAT, the taxable base would be €4,132.23, and the tax would amount to €867.77.
Requirements to Apply for the Special Regime
Not all assets and transactions qualify for this regime. For it to apply, the following conditions must be met:
Types of goods:
Used goods.
Works of art.
Antiques and collectibles. According to Article 136, these definitions must be interpreted strictly.
Authorized Resellers:
Only businesses that regularly engage in the purchase and sale of this type of goods can apply the regime.
Conditions of acquisition:
The goods must have been acquired in specific situations, such as purchases from end consumers or other resellers under this regime.
What is Considered a Used Good?
According to article 136.one.1 of the VAT Law, to be considered properly used, these requirements must be met:
Be movable property. Real estate is excluded.
Have a previous use and be capable of being reused for its original purpose.
Do not include recovered materials, containers, packaging, precious metals or refurbished goods that exceed their purchase price.
Keys to the Special Regime
The core of the regime is that VAT is applied only to the commercial margin of the operation, that is:
Margin = Selling price - Buying price.
Other important aspects:
Documentation:
Purchases from individuals must be justified by a signed receipt.
Waiver of the special regime:
It is possible to opt for the general regime. In this case, VAT will be applied to the total sale price, allowing the buyer to deduct it.
Intra-Community operations:
Purchases from other EU countries may have specific characteristics. It is essential to ensure that the documentation correctly reflects the applicable regime to avoid tax problems.
Conclusion
The special VAT regime for used goods is an effective solution for avoiding double taxation on the sale of secondhand goods. However, its proper application requires compliance with strict legal and documentary requirements.
If you need specific advice on how to apply this regime to your business, don't hesitate to contact us. And don't miss our upcoming articles, where we'll delve into other key aspects of VAT.