Understanding the Margin Scheme in Electronic Invoices for Used Cars Purchased from Dealerships

When you want to buy a used vehicle from a dealership, you have to deal with the margin scheme. What is it about? How is it managed in the electronic invoice?

Buying a second-hand car comes under the margin scheme. This at least if you decide to rely on a car showroom. But how does it work and what influence does it have on the final price?

Let’s leave from the explanation. The margin scheme concerns VAT and was introduced in the mid-1990s with Legislative Decree 41/95, articles from 36 to 40, on the subject of the sale and purchase of used goods. As such, cars also fall into the circle. Although the in-depth analysis focuses on the four wheels, as mentioned, the same applies to everything that has already had a previous owner.

According to the bill that regulates this function, the calculation varies depending on what is marketed and on the subjects who perform the operation. There are three methods of application: the flat-rate one, the analytical or ordinary one and the global one. From here start as many accounting obligations to be paid, as it is easy to understand, by the taxpayer.

Margin scheme, what is it for?

Its objective is to avoid double VAT taxation for those who resell the cars and who have not benefited from the deduction at the time of purchase, as it is not possible or already included in the price. When a vehicle is sold, the part subject to taxation is the one defined as the “margin”, and identifies the difference between the cost of the sale and that of the acquisition. Put like this it seems simple. It’s actually just the opposite.

In favor of car showrooms and dealerships play eSOLVER for Engines, a specialized software for this kind of administration. In this way, the insertion in the electronic invoice will not be so complicated as it will follow the configuration already assigned. The functionalities of the management system do not only concern the documents necessary for carrying out the various activities, such as orders, or invoicing, but also for all those related to purchases and sales.

Used cars, but what are they really?

Going back to the specifics of our topic, let’s clarify what is meant by a used vehicle. Essentially, according to the law there are two cases in which it can be defined as a second-hand means of transport. And a lot depends on the place of sale. That is, whether it took place within national borders or outside.

Therefore, used goods can be defined as those goods that can be reused in their original state or following a repair. The sale of these involves the application of the margin regime if they have been purchased according to four options. That is to say from a private individual, from a passion subject, to whom the regime had already been applied, from an economic operator who has not benefited from the deduction and from a community taxable subject with an exemption regime in his own country.

All vehicles intended for the transport of goods or people, with engine capacity exceeding 48 cc. or with a power greater than 7.2 kW can be considered “second hand”if they have traveled for more than six thousand kilometers and the sale took place after six months from the date of the first registration or registration with the PRA.