The VAT margin scheme, explained for car dealers

If you import and resell cars, the VAT margin scheme is probably the single rule with the biggest impact on your real profit. Here is how it works, in plain terms.

What is the VAT margin scheme?

It is a special regime under which VAT is applied only to the dealer's margin — the difference between the selling price and the purchase price — not to the entire selling price. For second-hand vehicles bought from private individuals or from sellers who could not deduct VAT, this changes the math significantly.

When does it apply?

Typically when you buy a used vehicle without deductible VAT and resell it. Instead of charging VAT on the full price, you charge it only on your margin. The exact conditions depend on local legislation and the documentation of the purchase, so always confirm each acquisition.

How it affects your profit

Take a car bought for a total cost of 13,561 € and sold at 15,595 €. The gross margin is 2,034 €. Under the margin scheme, the VAT is calculated on that margin: (15,595 − 13,561) × 21 / 121 ≈ 353 €. Your net profit becomes roughly 1,681 € — instead of paying VAT on the full 15,595 €.

The practical takeaway

Knowing whether a car qualifies for the margin scheme — and what your net profit will be — before you bid is what separates a guess from a decision. That is exactly what the CarZ profit calculator does: it applies the margin scheme automatically and shows you three price scenarios in real time.

The dealers who win at auction are not the ones who bid highest — they are the ones who know their numbers before the hammer falls.

This article is informational and not tax advice. For your specific situation, consult an accountant or tax advisor.