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Margin VAT: Everything you need to know
Margin VAT is a specific tax mechanism that allows only the difference between the purchase price and the sale price of a good or service to be taxed, rather than subjecting the entire turnover to VAT. How to calculate margin VAT? How to account for it? All the answers to your questions in this article.
What is Margin VAT?
Margin VAT is a specific tax regime defined by Article 297 A of the CGI , which applies to certain transactions, in particular for certain goods and services. Unlike traditional VAT which is calculated on turnover, margin VAT only applies to the difference between the purchase price and the sale price , i.e. the margin made by the seller.
This system aims to avoid double taxation, especially in cases where the property has already been taxed when it was first sold.
Who is affected by margin VAT?
Margin VAT applies to companies that meet the following 4 conditions :
- She is recognized as a taxable reseller
- The company exclusively carries out transactions on second-hand goods, which have not been subject to repair or intervention.
- Goods are purchased from persons not subject to VAT, such as individuals or sole traders exempt from VAT
- Purchases and resales are made within member countries of the European Union
There are also some cases of exclusions . This concerns:
- Goods obtained for free
- Goods purchased from a taxable person who has already charged VAT on delivery
- Imported goods
- Goods acquired through an intra-Community purchase subject VAT
Global calculation
The global calculation method represents the simplest and most common method for calculating margin VAT. For this method, it is sufficient to calculate the difference between the total amount of sales including VAT and the total amount of purchases including VAT.
How to account for margin VAT?
The accounting of margin VAT is carried out in the usual VAT declaration forms, at the line level corresponding to the VAT collected .
It is important to properly document each transaction, keeping clear traceability of purchase and sale prices to justify the margin and the applicable VAT amount.
How to create an invoice with margin VAT?
In addition to the mandatory information on an invoice , it is imperative to indicate the margin VAT when this regime is applied. It is also important to clearly detail the calculation method on the invoice to ensure its compliance.
It is recommended to add a statement specifying the type of sale, such as:
- “Special regime – Second-hand goods”
- “Special regime – Works of art”
- “Special regime – Collectibles or antiques”
Frequently Asked Questions
1. What services does Amary offer?
We provide comprehensive accounting services tailored for freelancers and businesses, including onboarding, tax registration, VAT declaration, and ongoing support. Our all-inclusive plans ensure that everything you need is included in your package. From dedicated accountants to legal reminders.
2. Who will manage my account?
Your account will be managed by our in-house team of French expert accountants, ensuring personalized attention and expert guidance throughout your accounting journey.
3. How do I get started with Amary?
To get started, simply contact us to schedule a call. We will discuss your needs, tailor a package for you, and guide you through the onboarding process.
4. Are there any hidden fees?
No, our packages are all-inclusive with transparent pricing. We believe in clear communication about all costs involved.
5. Can I customize my package?
Yes, we offer flexible options. During our initial call, we can discuss your specific requirements and tailor a plan that fits your needs.
6. How do I ensure compliance with legal obligations?
We provide timely legal reminders for important obligations and deadlines, ensuring you stay compliant with local regulations.
7. Is support available after I sign up?
Absolutely! Our dedicated team is always available for ongoing support, whether you have questions or need assistance with your accounting needs.
8. What is the Amary Club?
The Amary Club is a community event platform that allows you to connect with other professionals, network, and participate in enriching activities.
1. I'm starting a new business and need guidance
Amary will support you throughout your business setup journey, providing expert guidance and tailored solutions for every step of the process.
2. What is the process for the preparation and filing of financial statements?
Many businesses ask about the timeline and process for preparing financial statements, including how to categorize expenses, recognize revenue, and ensure IFRS compliance. Amary takes care of your obligations.
3. What is the Corporate Tax, and when will it apply?
Corporate Tax is set to be introduced in the UAE starting from June 2023, with a general rate of 9% applied to taxable income over AED 375,000. Failure to register within the required timeframe may lead to an administrative penalty of AED 10,000. Amary is here to guide you through every step of the process, ensuring full compliance and ease.
4. What is VAT, and how does it apply to businesses?
Value-Added Tax (VAT) was introduced in the UAE on January 1, 2018, at a standard rate of 5%. Common questions often relate to VAT registration thresholds, filing deadlines, eligible expenses, and proper VAT invoicing.
5. When is a business required to register for VAT?
A business must register for VAT if its annual taxable turnover exceeds AED 375,000. Voluntary registration is available if the turnover exceeds AED 187,500.
6. How frequently are businesses required to file VAT returns?
VAT returns are generally filed on a quarterly basis, though businesses with higher turnovers may be required to file monthly. Common questions revolve around understanding the specific deadlines and formats for submitting VAT returns.
7. What are the main penalties for VAT non-compliance?
Non-compliance with VAT regulations can lead to substantial penalties, including fines for late registration, missed filing deadlines, or inaccurate VAT submissions. These penalties may vary from significant fixed fines to a percentage of the unpaid tax.
8. Are financial audits mandatory for companies in the UAE?
Although financial audits are not legally required for all companies, many free zones and mainland business licenses mandate annual audits. Amary ensures your bookkeeping is accurate, preparing you to successfully pass the annual audit.
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