Marginal VAT for Used Phone Resellers in Europe: The Complete Guide (2026)

You get a price from a supplier. It looks competitive. You place the order, the invoice lands in your inbox — and your accountant calls to ask why there's no VAT to reclaim. Or you quote a client and they push back: the guy they bought from last month had the same phones for less. Same grade, different paperwork. The difference, almost every time, is Marginal VAT. Here is exactly how it works, what it means for your costs, and what to check before every wholesale order.

What Is Marginal VAT? (The Short Answer)

Marginal VAT — also called the Margin Scheme or Second-Hand Goods Scheme — is a special VAT rule that applies to the resale of used goods, including used smartphones. Under the Margin Scheme, VAT is calculated only on the seller's profit margin (the difference between the purchase price and the selling price), not on the full sale price.

This is the opposite of standard VAT, where tax applies to the entire transaction value.

Standard VAT example: - Phone sold for €200 - VAT at 20%: €40 - Net revenue to seller: €160

Margin Scheme example: - Phone bought for €120, sold for €200 - Margin: €80 - VAT at 20% on €80: €16 - Net revenue to seller: €184

The Margin Scheme exists because these goods were already in circulation — VAT was paid on them when they were first sold as new. Taxing the full value again on resale would result in double taxation.

The Legal Basis

The Margin Scheme is established under EU VAT Directive 2006/112/EC, Articles 312–325 (Special scheme for second-hand goods, works of art, collectors' items and antiques). This is an EU-wide framework — every member state must implement it.

Article 312: Defines "second-hand goods" as movable tangible property suitable for further use, acquired for resale.
Article 314: Specifies who can apply the scheme — taxable dealers acquiring goods from private individuals, non-VAT-registered persons, or other Margin Scheme dealers.
Article 323: Prohibits the buyer from deducting any VAT charged under the Margin Scheme.

If your supplier sells under the Margin Scheme, there is no separately stated VAT on the invoice, and you cannot reclaim any VAT on that purchase.

Why You're Paying Tax on the Margin, Not the Phone

Used smartphones qualify for the Margin Scheme because most trade-in stock originates from consumers — private individuals selling their old phones. When a network operator or trade-in platform collects a used phone from a private customer, that transaction carries no VAT. The phone enters the wholesale supply chain without any reclaimable input VAT attached to it.

This is why reputable used phone wholesalers — including SmartChoice — operate with 100% Margin Scheme stock. Every unit has a traceable Margin Scheme origin, which keeps the supply chain clean and compliant all the way to your customer.

Step-by-step: how a Margin Scheme sale works

Dealer buys used phones from private individuals or other Margin Scheme sellers — no deductible input VAT
Stock is tested, graded (A+/A/B/C), and prepared for resale
On sale: VAT is calculated on the margin only, included within the price — not added on top
Invoice does not show a VAT amount as a separate line

Formula: VAT amount = (Margin ÷ (1 + VAT rate)) × VAT rate

Example with 20% VAT: Purchase €90, Sale €150, Margin €60 → VAT = (€60 ÷ 1.20) × 0.20 = €10, Net margin: €50

A Margin Scheme invoice shows the total price (VAT inclusive), the supplier's VAT number, and wording indicating the scheme applies — typically: "VAT: Margin Scheme — Second-hand goods." It does not show a VAT amount as a separate line item.

VAT Rates by Country

The Margin Scheme applies in all EU member states. Key markets:

| Country | Rate | Law | |---|---|---| | Germany | 19% | §25a UStG (Differenzbesteuerung) | | Poland | 23% | Art. 120 ustawy o VAT | | Romania | 19% | Art. 312 Codul Fiscal | | Estonia | 22% | §41 Käibemaksuseadus | | Netherlands | 21% | Art. 28b–28h Wet OB | | France | 20% | Art. 297A CGI |

How Marginal VAT Affects Your Actual Costs

This is where most resellers make mistakes. A Margin Scheme price and a standard VAT price at the same number are not the same cost to you.

If you're VAT-registered and can reclaim standard VAT: Standard VAT — pay €240, reclaim €40, net cost €200. Margin Scheme — pay €200, reclaim nothing, net cost €200. Same result, but Margin Scheme stock is often priced lower because the supply chain carries less tax overhead.

If you're not VAT-registered or sell B2C: Standard VAT purchase at €240 = cost is €240. Margin Scheme at €200 = cost is €200. The Margin Scheme is better by €40 per unit.

If you resell under the Margin Scheme yourself: Your purchase price becomes your cost base. You pay VAT only on your own added margin. The scheme passes through the chain to your customer. This is the most tax-efficient route — and it requires buying from a 100% Margin Scheme wholesaler.

What "100% Marginal VAT Stock" Actually Means

When a wholesaler sells 100% Marginal VAT stock, it means:

Every unit was acquired from a Margin Scheme-eligible source
No unit was purchased with reclaimable input VAT at any point in the supply chain
Every sale can be invoiced under the Margin Scheme
Buyers can continue the Margin Scheme when they resell

Not every wholesaler offers this. Some suppliers mix stock — buying partly from VAT-registered sources (standard VAT) and partly from non-VAT sources (Margin Scheme). Mixed stock creates complications: standard VAT units cannot be sold under the Margin Scheme. A wholesaler with 100% Margin Scheme stock eliminates this entirely.

The Mistakes That Get Resellers Caught in an Audit

Attempting to reclaim VAT from a Margin Scheme invoice. A Margin Scheme invoice contains no separately stated VAT. There is nothing to reclaim — and tax authorities will correct it.

"Margin Scheme means the goods are cheaper." Not necessarily. The scheme determines how VAT is calculated, not the market price. Whether it's cheaper depends entirely on your ability to reclaim standard VAT.

"Any used phone can be sold under the Margin Scheme." Only if it was acquired from a qualifying source. If you bought from a VAT-registered business under standard VAT and reclaimed the input VAT, you cannot sell that unit under the Margin Scheme.

"UK Margin Scheme stock qualifies in the EU." Post-Brexit, this is no longer the case. Importing from the UK and paying import VAT breaks the chain.

"The Margin Scheme is just an accounting detail." It affects pricing negotiations, supplier selection, invoice processing, VAT returns, and your ability to offer Margin Scheme treatment to your own customers.

5 Questions to Ask Every Wholesale Supplier Before You Order

Do you sell under the Margin Scheme? Ask explicitly. Request a sample invoice — it should state the Margin Scheme notation and show no separate VAT amount.
Is your stock 100% Margin Scheme origin? Mixed-origin stock creates compliance overhead. Confirm before ordering, not after.
What grading standard do you use? A €200 Grade A and a €200 Grade B are not comparable. Confirm the grade definitions in writing.
What documentation do you provide per unit? In an audit you need purchase invoices that demonstrate Margin Scheme origin.
Are you VAT-registered in your country? Ask for their VAT number and verify it on VIES (ec.europa.eu/taxation_customs/vies).

Frequently Asked Questions

What is the difference between Marginal VAT and standard VAT for used phones?

Under standard VAT, tax applies to the full sale price. Under the Margin Scheme, tax applies only to the profit margin — the difference between purchase price and selling price. For used phones, this results in lower VAT liability for the seller and less overall tax friction through the supply chain.

Can I reclaim VAT when buying used phones under the Margin Scheme?

No. Margin Scheme invoices do not show VAT separately. There is nothing to reclaim. Attempting to reclaim VAT from a Margin Scheme invoice is an error that tax authorities will correct.

Does Marginal VAT apply to all EU countries?

Yes. The EU Margin Scheme is mandated by EU VAT Directive 2006/112/EC and implemented in all member states. The VAT rate applied to the margin differs by country (19% in Germany and Romania, 20% in France, 21% in the Netherlands, 22% in Estonia), but the core mechanism is identical.

Can I pass the Margin Scheme on to my customers?

Yes, if you acquired the goods under the Margin Scheme and resell them as a taxable dealer. The scheme passes through the supply chain as long as each link qualifies. This is why buying from a 100% Margin Scheme wholesaler matters.

Does the Margin Scheme apply to intra-EU B2B sales?

Yes. Under Article 315 of the EU VAT Directive, the Margin Scheme takes precedence over standard intra-community supply rules. When a Margin Scheme dealer in Estonia sells to a business in Germany, the sale is still under the Margin Scheme — the seller does not charge German VAT, and the buyer cannot reclaim any VAT.

What documentation do I need for a tax audit?

Purchase invoices showing Margin Scheme origin for every unit, sales invoices with correct Margin Scheme notation, and a stock record linking each unit from purchase to sale. Germany in particular has strict unit-level record-keeping requirements.

What happens if I mix Margin Scheme stock and standard VAT stock?

Standard VAT stock cannot be sold under the Margin Scheme — you must invoice it under standard VAT. Mixing stock requires tracking each unit's origin carefully and issuing different invoice types. Buying from a supplier with 100% Margin Scheme stock eliminates this compliance burden.

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This guide is for informational purposes only. Tax rules can change and vary by jurisdiction. Consult a qualified tax adviser for advice specific to your business.

Sources: EU VAT Directive 2006/112/EC; German UStG §25a; Polish VAT Act Art. 120; Romanian Fiscal Code Art. 312; Estonian KMS §41.