Accounting
The Cyprus Margin Scheme for Second-Hand Goods
Christopher Dosin · Founder / CTO
Complete guide to the Cyprus Margin Scheme for VAT on second-hand goods. Learn eligibility, calculations, compliance requirements, and practical examples.
What is the Margin Scheme?
The Margin Scheme is a special VAT arrangement for dealers in second-hand goods, works of art, collectors' items, and antiques. Instead of calculating VAT on the full selling price, VAT is applied only to the profit margin, the difference between your buying and selling price.
This prevents double taxation, since the original owner likely already paid VAT when the goods were first purchased.
Who Can Use the Margin Scheme?
The scheme is available to taxable dealers who:
- Purchase eligible goods from non-taxable persons (private individuals)
- Purchase from other margin scheme dealers
- Buy from businesses that could not deduct input VAT on the original purchase
Eligible Goods
| Eligible | Not Eligible |
|---|---|
| Second-hand cars | New goods |
| Used furniture | Goods purchased with full VAT recovery |
| Artwork (original) | Precious metals (VAT on full price) |
| Antiques (100+ years old) | Standard commercial goods |
| Collectors' items |
Calculating VAT Under the Margin Scheme
The formula is straightforward:
Margin = Selling Price minus Purchase Price
VAT = Margin x (VAT Rate / (100 + VAT Rate))
Example
You buy a second-hand car for €5,000 and sell it for €7,000:
- Margin = €7,000 minus €5,000 = €2,000
- VAT (at 19%) = €2,000 x (19/119) = €319.33
- Net margin = €2,000 minus €319.33 = €1,680.67
Compare this to standard VAT: you'd charge 19% on the full €7,000 = €1,330 - a much larger VAT burden.
Record-Keeping Requirements
Margin scheme dealers must maintain a stock book recording:
- Description of each item
- Purchase date and price
- Seller's name and address
- Sale date and price
- Margin and VAT calculated
Invoices issued under the margin scheme must include the notation: "Margin Scheme - Second-hand goods" and must NOT show the VAT amount separately.
Global vs. Individual Accounting
Individual accounting: Calculate the margin on each item separately. If a sale results in a loss (negative margin), the VAT is zero. You cannot offset losses against profits.
Global accounting: Available for certain categories (e.g., small items under €500). Calculate the total margin for all purchases and sales within a VAT period. Losses can offset profits.
Compliance Checklist
- Only apply the scheme to eligible goods purchased without recoverable VAT
- Maintain a detailed stock book for all margin scheme items
- Do not show VAT separately on margin scheme sales invoices
- Report margin scheme sales separately on your VAT return
- Do not recover input VAT on margin scheme purchases