Dealers in second-hand goods, art, antiques and collectibles may, under certain conditions, use the VAT margin scheme. Under this scheme, VAT is not calculated on the full selling price, but only on the profit margin: the difference between the purchase price and the selling price. The VAT amount is not shown separately on the invoice. This has implications for how you construct such an invoice in UBL.

With a regular invoice, you remit VAT on the full selling price excluding VAT, and the buyer can reclaim that VAT as input tax. The margin scheme works differently:

• VAT is calculated on the margin (selling price minus purchase price)
• The VAT amount is not shown separately on the invoice
• The buyer cannot reclaim VAT
• The invoice must state that the margin scheme is being applied

The scheme is intended for situations where the entrepreneur has purchased goods without VAT deduction rights (for example, when purchasing from a private individual).

For an invoice under the margin scheme, you use VAT category code E (Exempt from tax) with an explanation that the margin scheme applies.

<cac:TaxTotal>
  <cbc:TaxAmount currencyID="EUR">0.00</cbc:TaxAmount>
  <cac:TaxSubtotal>
    <cbc:TaxableAmount currencyID="EUR">1500.00</cbc:TaxableAmount>
    <cbc:TaxAmount currencyID="EUR">0.00</cbc:TaxAmount>
    <cac:TaxCategory>
      <cbc:ID>E</cbc:ID>
      <cbc:Percent>0.00</cbc:Percent>
      <cbc:TaxExemptionReason>Margin scheme - second-hand goods</cbc:TaxExemptionReason>
      <cac:TaxScheme>
        <cbc:ID>VAT</cbc:ID>
      </cac:TaxScheme>
    </cac:TaxCategory>
  </cac:TaxSubtotal>
</cac:TaxTotal>

The VAT amount on the invoice is 0.00 euros. The TaxExemptionReason states that the margin scheme is being applied. The TaxableAmount is the full selling price (not the margin). The actual VAT on the margin is calculated and remitted through your VAT return, but does not appear on the invoice.

Note: in the Peppol BIS code list, there is no specific VATEX code for the VAT margin scheme (articles 312-325 of the VAT Directive). The code vatex-eu-132 that is sometimes used is actually intended for exemptions in the public interest such as healthcare and education (article 132). For the margin scheme, use the TaxExemptionReason text field as the primary indicator, with a clear statement such as "Margin scheme - second-hand goods" or "Special arrangement - Second-hand goods". The TaxExemptionReasonCode element can be omitted.

On the invoice line, you state the selling price. The purchase price and the margin do not appear on the invoice:

<cac:InvoiceLine>
  <cbc:ID>1</cbc:ID>
  <cbc:InvoicedQuantity unitCode="EA">1</cbc:InvoicedQuantity>
  <cbc:LineExtensionAmount currencyID="EUR">1500.00</cbc:LineExtensionAmount>
  <cac:Item>
    <cbc:Name>Vintage desk, oak, ca. 1920</cbc:Name>
    <cac:ClassifiedTaxCategory>
      <cbc:ID>E</cbc:ID>
      <cbc:Percent>0.00</cbc:Percent>
      <cac:TaxScheme>
        <cbc:ID>VAT</cbc:ID>
      </cac:TaxScheme>
    </cac:ClassifiedTaxCategory>
  </cac:Item>
  <cac:Price>
    <cbc:PriceAmount currencyID="EUR">1500.00</cbc:PriceAmount>
  </cac:Price>
</cac:InvoiceLine>

When applying the margin scheme, the invoice must contain one of the following statements (depending on the type of goods):

• "Special arrangement - Second-hand goods"
• "Special arrangement - Works of art"
• "Special arrangement - Collector's items and antiques"

This statement is included in the TaxExemptionReason field and optionally also in a Note element at document level. The tax authority requires the statement to be clearly visible.

It is possible for an invoice to contain both goods under the margin scheme and goods with regular VAT. In that case, the invoice contains two TaxSubtotal blocks: one for category E (margin scheme) and one for category S (standard rate). The lines are split per VAT category.

Important: the margin scheme does not apply to all second-hand goods. Specific conditions apply. Consult your tax adviser if you are unsure whether the scheme applies to your situation.

eConnect processes invoices with the margin scheme in the same way as other invoices with VAT category E. The invoice is validated, transformed if necessary and routed to the receiver. Ensure the TaxExemptionReason field is filled in, otherwise the validation may produce a warning.

• Reverse charge VAT in e-invoices
• The structure of a UBL invoice
• Invoice Type Codes
• Surcharges and discounts in UBL
• Validate invoice
• Key sending fields in UBL