The trade in second-hand goods — cars, phones, furniture, clothes — occupies a significant place in the economy, especially for automobiles. For these transactions, the VAT Act provides a special and advantageous regime: taxing the price margin.
In this manual, an accounting firm Rodi Consult (Varna) explains how the margin regime works, who can apply it, and what the rules are — updated for 2026.
In short: For second-hand goods, dealers may apply a "margin taxation" regime, in which VAT is due only on the profit (the difference between the selling and purchasing price), and not on the entire sales value. The invoices shall state "Art. 143 of the VAT Act", and there is no right to a tax credit for these goods.
What are second-hand goods?
These are used movable property, suitable for further use — for example, used phones, cars, furniture, clothing, and electronics. They are not Second-hand goods: works of art, collectibles, antiques (over 100 years old) and precious metals/gemstones.
The „margin taxation“ regime“
Regulated in Chapter 17 of the VAT Act, it taxes only the positive difference (margin) between the selling and purchasing prices. This avoids charging VAT on already taxed goods.
Example: A dealer buys a used car for €40,000 and sells it for €64,000. The margin is €24,000; the tax base is €24,000 / 1.20 = €20,000; the VAT due is €24,000 − 20,000 = 4 000 €.
When can the dealer apply the regime?
The regime is applicable when the goods are acquired by:
- another dealer who also applies the margin regime;
- non-taxable person (e.g. individual);
- a taxable person who is not registered under the VAT Act;
- registered person, but with exempt supply under Art. 50 (when the supplier was not entitled to a tax credit).
Invoices and documentation
The invoices issued must include: „"Art. 143 of the VAT Act"“, without specifying the tax base and amount of the tax (Art. 89 PPZDDS). An invoice is not mandatory for individuals, but a monthly sales report is drawn up. The tax is charged at special protocol (one for all sales for the month), and the due date occurs on the last day of the month of the tax event.
Tax credit
For goods under the margin regime, the dealer not entitled to tax credit. For other goods and services (repairs, consumables) there is a right, but for the year it cannot exceed the accrued sales tax. For more information about the mechanism, see the article about the VAT tax credit.
Right to choose
The regime is optional — for each supply the dealer can apply the general rules. In that case, he does not enter „Art. 143”, but the tax base cannot be below the acquisition price, and the right to a tax credit arises only upon the subsequent sale (Art. 151, para. 6).
FAQ
What is margin taxation on second-hand goods?
This is a special VAT regime, where VAT is due only on the margin - the positive difference between the selling and purchasing price, and not on the entire sales value as in the general case. The aim is to avoid charging VAT on VAT.
Who can apply the margin regime?
Dealers of second-hand goods - any natural or legal person who trades in such goods. No notification is submitted to the NRA. It applies when the goods are acquired by a private individual, by a non-VAT registered person, by another margin dealer or in the case of an exempt supply under Art. 50.
What is written on the invoice when margin taxation is applied?
The invoice must include the text "Art. 143 of the VAT Act", without specifying the tax base and amount of the tax. For sales to individuals, an invoice is not mandatory, but the dealer prepares a monthly report on the sales made.
Is a dealer of second-hand goods entitled to a tax credit?
For goods under the margin regime — no. For other goods and services related to the activity (repairs, consumables), the dealer is entitled to a tax credit, but with a limitation — for the year it cannot exceed the accrued sales tax.
Is the margin regime mandatory?
No. The application is optional and for each specific supply the dealer can apply the general rules of the VAT Act. However, in that case the tax base cannot be lower than the acquisition price, and the right to a tax credit arises in the period of the subsequent sale.
The conclusion
The margin regime is a great advantage for second-hand goods traders, but it requires precision — correct determination of the margin, correct invoices with "Art. 143" and attention to tax credit. Mistakes lead to additional liabilities.
Do you trade in second-hand goods or cars? Explore Rodi Consult accounting services or is contact us. Phone: +359 893 474 576.
This article is for informational purposes only and does not constitute tax advice. Please consult an accountant for your specific situation.
