What is a margin VAT invoice?
A margin VAT invoice is a document issued at the time of a purchase or sale in which the value added tax is calculated on a margin basis.
Important!
The margin is the difference between the amount for which the goods were sold and the amount for which they were previously purchased by the seller. So if a seller bought a car for PLN 5,000 and then sells it for PLN 6,500, his margin is PLN 1,500.
Margin VAT invoice – the most important points
A margin VAT invoice is not drastically different from a traditional VAT invoice – at least in terms of appearance. The difference is in the method of accounting. There is no specific amount of VAT on the margin VAT invoice, yet the seller must calculate the amount of tax himself and pay it to the relevant tax authority.
The benefit for the seller is that in the case of a margin VAT invoice, the margin is the taxable amount. Let’s look at this with an example.
EXAMPLE
Ms. Julia runs the commission. She recently bought a car for 25,000 zlotys and brought it to a saleable condition. The customer bought the car for the amount of PLN 32,000. If Ms. Julia had used an ordinary sales document, she would have had to pay 23% VAT, or more than PLN 7,000. After applying the margin VAT invoice, it only takes into account the margin as the tax base. In this case, VAT will only amount to PLN 1,610. However, it should not be forgotten that the seller is not allowed to deduct VAT from the purchase invoice.
Who can issue such an invoice?
If the use of a margin VAT invoice is so advantageous for sellers, why doesn’t every entrepreneur take advantage of this opportunity on every occasion? The trouble is that a margin VAT invoice cannot be issued by every business, but only by a few groups of taxpayers. These include people who:
- make deliveries of used goods, such as used cars or electronics;
- provide services in the tourism industry;
- make deliveries of antiques and other collectibles;
- make deliveries of artwork.
While this should be obvious, it is worth remembering that only active VAT payers can issue VAT margin invoices.
The type of invoice in question is used most often by those who sell used goods. According to the Law on Goods and Services Tax, used goods are defined as “movable tangible goods suitable for further use in their current state or after repair, other than works of art, collector’s items, precious metals and precious stones.”
What should a margin VAT invoice contain?
Margin VAT invoice is a specific type of document, but in its structure it differs little from a classic VAT invoice. Nonetheless, let’s remind you what elements should be included in the margin VAT invoice:
- invoice date;
- date of sale;
- invoice number,
- Seller’s data (company name or name, address, tax ID);
- buyer data (as above);
- Name of the good or service being sold, quantity, unit;
- the price of the goods sold – note: without specifying tax. The amount should also be described in words;
- form and date of payment;
- method of settlement (cash or wire transfer);
- seller’s bank account number.
It is very important that such an invoice be labeled according to the type of transaction it certifies:
- “Margin procedure – second-hand goods”;
- “Margin Procedure for Travel Agents.”
- “Margin procedure – collector’s items and antiques”;
- “Margin Procedure – Works of Art.”
Margin VAT – key advantages and disadvantages
The use of settlement on the basis of a margin VAT invoice is used most often by sellers of used cars and used equipment, such as telephones. The most important advantage of such a solution is the possibility to reduce the amount of VAT that will have to be paid to the Tax Office. In many cases, this is a really big savings, so vendors are eager to take advantage of the privilege of being able to issue a margin VAT invoice. Another advantage is the very simple and clear appearance of the invoice.
Like any solution, the margin VAT invoice also has drawbacks. The most important of these is that the use of this document does not allow the buyer to deduct VAT. Unfortunately, such an invoice cannot be booked into the VAT purchase register either. In some cases, a buyer may encounter a refusal to repair or return goods purchased on the basis of a margin VAT invoice on the grounds that they were used goods.
Summary
Using a margin VAT invoice may initially seem complicated due to the need to calculate the margin and VAT yourself. In practice, however, vendors are very quickly convinced of this solution. The reasons are two. First: the use of margin VAT invoices allows you to save a lot. Second: the use of these invoices is generally very simple.
So as long as your company has the ability to issue margin VAT invoices, there is little reason to avoid this type of settlement. It’s just another way to make a little more money.
