Insights
VAT
Margin scheme for assets consisting of used parts
If an entrepreneur purchases a used item from a private seller without input tax deduction, refurbishes it and then resells it, they can apply the VAT margin scheme to that sale under certain conditions.
The aim of the margin scheme is to avoid double VAT burdens when resellers (entrepreneurs) purchase certain goods, e.g. used items, antiques, etc., from private individuals who could not claim input tax deduction. If the entrepreneur then sells the item without applying the margin scheme, the turnover would be subject to VAT again, resulting in a double VAT burden. Under the margin scheme, however, only the difference between the purchase price and the selling price is subject to VAT.
Decision of the Federal Fiscal Court
In a recent case it was disputed whether the margin scheme applies to the sale of used, individually adapted stair lifts, or whether a new asset has been created for which the margin scheme is not possible. Under EU law, only those items may be subject to the margin scheme that are either reusable in their current condition or after a mere refurbishment. If the buyer’s processing steps go beyond a simple refurbishment, a different item is produced, and the margin scheme no longer applies.
In addition, the Federal Fiscal Court (BFG) noted that the entrepreneur had to spend a multiple of what he paid for the used items on the new running rail. This value ratio can be an indication that it is not merely maintenance.
Since there is no case law from the Administrative Court (VwGH) on how far a modification of an item may go before it is considered a different item, the appeal to the VwGH was admitted and has already been filed. It therefore remains to be seen what conclusion the VwGH will reach.
Decision of the Federal Fiscal Court
In a recent case it was disputed whether the margin scheme applies to the sale of used, individually adapted stair lifts, or whether a new asset has been created for which the margin scheme is not possible. Under EU law, only those items may be subject to the margin scheme that are either reusable in their current condition or after a mere refurbishment. If the buyer’s processing steps go beyond a simple refurbishment, a different item is produced, and the margin scheme no longer applies.
In addition, the Federal Fiscal Court (BFG) noted that the entrepreneur had to spend a multiple of what he paid for the used items on the new running rail. This value ratio can be an indication that it is not merely maintenance.
Since there is no case law from the Administrative Court (VwGH) on how far a modification of an item may go before it is considered a different item, the appeal to the VwGH was admitted and has already been filed. It therefore remains to be seen what conclusion the VwGH will reach.