Margin Scheme Taxation
Also: Margin scheme, § 25a UStG, differential taxation
The margin scheme is a special VAT procedure under which dealers calculate tax only on the trading margin (the difference between purchase and selling price), not on the full selling price.
The margin scheme (§ 25a of the German VAT Act, UStG) is a special VAT procedure for the resale of second-hand goods, works of art, antiques and collectibles. In the precious metals trade, it plays a significant role primarily in the purchase and resale of silver coins, collector coins and non-VAT-exempt second-hand silver items. Instead of charging the full VAT on the gross selling price, tax is calculated only on the margin — that is, the difference between the purchase price and the selling price.
Note: This article is for general information purposes only and does not constitute individual tax advice. Please consult a tax adviser for specific questions.
Requirements under § 25a UStG
A dealer may only apply the margin scheme if all four conditions are met:
- The dealer is a reseller (commercial buyer and seller).
- The item was acquired from a private individual or an entrepreneur not entitled to deduct input VAT (e.g. a small business) — or from another margin scheme dealer.
- The item is a movable tangible asset (e.g. coins, jewellery, bars as second-hand goods — not new goods).
- The item was acquired domestically or within the EU.
If regular VAT was shown on the purchase invoice (e.g. when buying from another VAT-registered dealer), the margin scheme cannot be applied.
The Formula: Tax Only on the Margin
Tax base = Selling price − Purchase price (= trading margin)
VAT = Tax base × 19 % (standard rate)
Important: The margin is a gross margin — VAT is already included within it. The correct way to extract the tax is:
Tax portion = Trading margin × (19 / 119)
Net margin = Trading margin × (100 / 119)
If the margin is negative (selling price < purchase price), no tax liability arises — and no input tax refund claim either.
Comparison: Standard Taxation vs. Margin Scheme
| Feature | Standard taxation | Margin scheme |
|---|---|---|
| Tax base | Total selling price (net) | Trading margin only (gross) |
| Shown on invoice | VAT shown separately | No separate VAT disclosure permitted |
| Input tax deduction for buyer | Possible | Not possible |
| Typical use case | New goods / B2B | Second-hand goods, collectors' market |
| Legal basis | § 10 UStG | § 25a UStG |
Significance for the Precious Metals Trade
Silver Coins and Collector Coins
Silver — unlike investment gold — is subject to the full VAT rate of 19%. When purchasing from private individuals (e.g. inherited items, old collector coins), a commercial dealer can therefore use the margin scheme: VAT is not paid on the entire resale price, only on the margin. This significantly reduces the effective tax burden and enables more competitive buying prices.
Effect on End Consumers
Since the dealer may not show VAT separately under the margin scheme, the buyer cannot deduct input tax. For private individuals this is irrelevant; for businesses (e.g. jewellers acquiring collector coins as trade goods), standard taxation may be more advantageous.
Global Margin Scheme
For items with a purchase price of no more than 500 euros per piece, the dealer may optionally apply the global margin scheme under § 25a para. 4 UStG: instead of accounting for each sale individually, the sum of all selling prices is netted against the sum of all purchase prices for a tax period. This simplification reduces the recording burden in small-scale day-to-day business. If a negative overall balance results in a period, this neither triggers a tax refund nor may it be carried forward to other periods.
Distinction: Investment Gold and Investment Silver
Investment gold (gold bars and gold coins meeting certain criteria, e.g. fineness ≥ 995/1000) is fully exempt from VAT under § 25c UStG — the margin scheme does not come into play here at all. When refineries purchase scrap gold or dental gold, separate special rules apply (tax liability of the service recipient, § 13b UStG).
For investment silver, however, there is no comparable exemption; here the margin scheme is the most important instrument for tax optimisation in the secondary market. Use our tax estimator and the silver price to estimate the effective tax burden for your specific transaction.
Obligations and Documentation
Dealers applying the margin scheme must:
- Keep purchase records without gaps (private individuals do not issue invoices → self-prepared vouchers required).
- Show no VAT on the outgoing invoice and include the note "Margin scheme pursuant to § 25a UStG".
- Maintain separate records for margin-scheme and standard-rate transactions.
- Enter the tax base (net margin) — not the turnover — in the VAT return.
Violations — such as unauthorised application or missing labelling on invoices — can result in a subsequent demand for the full standard tax.
In Brief
The margin scheme under § 25a UStG is a key VAT planning instrument for commercial precious metal and coin dealers when buying from private individuals: only the trading margin is taxed, not the full selling price — this makes the secondary market for silver coins and collectibles economically viable. For private sellers, nothing changes; for businesses as buyers, however, the input tax deduction is not available.