Configuring margin VAT management mode
Configure your default VAT margin management mode.
Definition of margin VAT
Margin VAT is a special VAT taxation system applied when the tax is calculated not on the total selling price, but only on the profit margin achieved by the seller.
- Reduced tax base: Only the difference between the purchase price and the sale price is subject to VAT.
- Applicable to certain sectors: In particular second-hand goods, works of art, second-hand vehicles, travel agents and real estate in certain cases.
- No recovery of input VAT: The initial purchaser cannot deduct VAT on his purchase.
Calculation formula: VAT due=Margin excluding VAT×VAT rate
Accounting example of VAT on the margin for France:
An antique dealer resells a second-hand item
- The antique painting is purchased for 2,000 excluding VAT.
- Resale of the painting at a selling price of 3,500 excluding VAT.
1- Accounting entries in the purchase journal at the time of purchase of the vehicle for France:
| DATE | ACCOUNT | DESCRIPTION | DEBIT | CREDIT |
|---|---|---|---|---|
| DD/MM/YYYY | 607 | Purchase of second-hand goods | 2,000 | |
| DD/MM/YYYY | 512 | Bank | 2,000 |
- At this stage, there is no deductible VAT, as VAT on the margin does not allow VAT on the purchase to be reclaimed.
2- Accounting entries in the sales journal when the painting is resold in France:
| ACCOUNT | DESCRIPTION | DEBIT | CREDIT |
|---|---|---|---|
| 411 | Customers | 3,800.00 | |
| 707 | Sale of second-hand goods | 3,500.00 | |
| 4457 | VAT collected | 300.00 |
Configuring your VAT management mode
Once you have determined your VAT reporting regime from Settings > Invoicing > Invoicing settings, choose your VAT margin management mode.
You can customise the wording displayed on purchase and sales documents.
The VAT management mode can be defined by default from the invoicing settings, then from each item record, or from a sales or purchase line.
To find out or confirm your VAT management method, please contact your tax office or accountant.
