Boost your business with tax savings: Understanding Marginal VAT

For resellers buying and selling refurbished technology, tax regulations like Marginal VAT represent a powerful tool for reducing tax liability, increasing profitability, and streamlining cross-border trade.  

This tax structure is particularly beneficial in the EU, where it helps streamline cross-border trade and simplify VAT reporting for international transactions (European Union). 

This blog explores how Marginal VAT works and how you can leverage it to improve profitability and streamline your operations. 

What is Marginal VAT? 

Marginal VAT (Value Added Tax) is a tax scheme designed for second-hand goods, like refurbished tech. Instead of paying VAT on the total sale price, businesses pay VAT on the difference, or margin, between the purchase price and the resale price (KPMG). 

The Benefits of Marginal VAT for Your Business 

The biggest benefit of Marginal VAT is reduced tax liability. Businesses can save significantly by applying VAT only to the profit margin, particularly in the refurbished tech market. This allows sellers to offer competitive pricing while maintaining profitability, making it easier to attract price-sensitive customers. 

For example, if you buy a refurbished iPhone for $200 and sell it for $250, you only pay VAT on the $50 profit, not the full $250 sale price. This can lead to significant savings, especially if you’re trading in high volumes. 

EU-Friendly: Ideal for European sellers 

For EU-based sellers, Marginal VAT provides an additional layer of cost-effectiveness, as it reduces the overall tax exposure on transactions. This allows you to maintain better profit margins while offering refurbished products at competitive rates, further appealing to consumers and business customers looking for high-quality tech at affordable prices. 

Streamlining cross-border trade 

The Marginal VAT system is particularly well-suited for global trade, as it simplifies VAT calculations and reduces the complexity that often accompanies international transactions. This is a crucial benefit for businesses that operate in multiple countries or are expanding into new regions and want to streamline their tax obligations while continuing to grow their market reach. 

Maintaining competitive edge 

By lowering the cost of goods and making your VAT computations more efficient, the Marginal VAT system is an attractive option for businesses looking to optimize their operations and stay ahead in a competitive landscape. 

Looking to take advantage of marginal VAT on refurbished tech? – Book a demo to see how Callisto can help you.