Differenzbesteuerung
German margin VAT scheme under § 25a UStG that taxes only the dealer's gross margin instead of the full sale price. Used when reselling goods bought from non-VAT sellers.
Differenzbesteuerung (sometimes called the margin scheme in English) is a special German VAT regime defined in § 25a of the Umsatzsteuergesetz (UStG). It applies to professional dealers who buy used goods from non-VAT sellers (private individuals, other margin-scheme dealers, Kleinunternehmer, etc.) and resell them.
Under the standard VAT regime (Regelbesteuerung), a dealer would charge 19% VAT on the full sale price. Under Differenzbesteuerung, VAT is calculated only on the dealer's gross margin (sale price minus purchase price).
How the calculation works
A watch bought from a private seller for €8,500 and sold for €9,500 has a gross margin of €1,000. Under § 25a, VAT is calculated by extracting it from the margin: €1,000 / 1.19 = €840 net margin + €160 VAT. The dealer owes the tax office €160.
Under Regelbesteuerung, the same transaction would owe roughly €1,520 in VAT (19% of the net sale price required to net €9,500 gross).
Invoice requirements
A § 25a invoice differs from a standard invoice in two specific ways. First, it must include a legal note such as "Gebrauchtgegenstände / Sonderregelung" or "Differenzbesteuerung gemäß § 25a UStG". Second, no separate VAT line may be shown. The total is the total. The buyer cannot deduct input VAT from a § 25a invoice.
Common pitfalls
Mixing schemes mid-watch is a frequent error: buying as private (so § 25a applies) but processing a downstream service through a Regelbesteuerung supplier. The service VAT cannot be deducted, and the underlying watch remains in the margin scheme.
For a working dealer's perspective on operating under § 25a, see our journal article on Differenzbesteuerung for watch dealers.