Margin or new product
For customers in the European Union World Wine & Whisky’s stock can be divided into two categories:
- Margin scheme products
- New goods/products.
What is a margin product?
A margin scheme is a special VAT scheme for companies trading in used goods, such as antiques, to prevent double taxation on the sale of second-hand goods. This is quite strange if you look at the products we offer: how can a bottle of whisky be ‘used’ or ‘second-hand’? Goods that are bought from a private person are under Dutch VAT legislation always categorized as used goods, even though these have never been used before.
In our case it means that the bottle of whisky has been originally bought by a private person, through this transaction the VAT has been paid to the government, and World Wine & Whisky bought the product from a private person. The bottles we offer have not been opened. The margin scheme is applied to prevent double payment of VAT to the government by only paying VAT on the difference between the sale- and purchase price of goods.
Mr. Jan buys a bottle of whisky at a local shop in Amsterdam in 1992. He buys this bottle and pays through this transaction VAT under the Dutch tax legislation. After 30 years he sells it to World Wine & Whisky. We buy the bottle without VAT from Mr. Jan, as he is a private person and cannot charge VAT upon selling.
If World Wine & Whisky would offer this product as ‘new’, we would remit VAT to the Dutch tax administration for the entire selling price: the purchase price + profit. This would mean that the Dutch government would receive double payment of VAT for this product: once when Mr. Jan bought it in 1992 (purchase price) and once when we sell it to a new customer (purchase price + profit). To prevent this, we offer the bottle as a margin product. This means that we only calculate VAT for our profit margin: the VAT is calculated for the difference between the selling price and the purchase price of the 'used' good.
On the invoice for the customer, the price excluding and including VAT is the same because this is a legal requirement under the Dutch tax legislation. Please note: no VAT can be deducted from a margin product because within the margin scheme the customer is assumed to be a private person. Whether a product on our website is a margin product or a new product can be found in the product description. Below, you can find a diagram that explains the VAT situation per product category.
For more information about VAT schemes, please visit the following website, click here.
If you have any other questions, please let us know. Please send an email to: [email protected].